Small business owners in North Carolina know that they face the risk of falling into debt they can’t repay. Filing for bankruptcy, whether it is for personal debts or business debts or both, is never an easy step to take. But in business foreclosure, it can be the right move to put a failed venture behind a business owner before moving on to new enterprises. It’s important, however, to take the right steps when choosing this financial path.
The first thing the owner of a shuttered business needs to do is work out exactly how much is owed, and to whom. Leased equipment, purchased supplies, unsold stock, outstanding loans and other assets and debts need to be tallied. In some cases, owned equipment and other salable items can be sold to pay off some unpaid bills before filing bankruptcy. Financial challenges can seem less daunting when there isn’t quite so much red ink on the books. However a business owner decides to handle such assets, it is vitally important to know the exact amount of liability before filing for bankruptcy.
Next, it must be decided whether a personal bankruptcy or business bankruptcy, or both, will be filed. There are personal guarantees to be considered, which may entitle the lender to any remaining assets of the business. Also important to think about is whether personal assets were used as collateral for business loans. Even in a business bankruptcy, a creditor may still lay claim to the borrower’s personal assets.
An attorney experienced in business foreclosures, defaults, judicial sales, tax liens, real estate issues and other financial and legal challenges may be able to help business owners with filing for bankruptcy in a way that preserves as many personal assets as possible. Such a lawyer may also be able to arrange more agreeable terms or settlements with creditors in bankruptcy proceedings.
Source: Fox Business, “My Small Biz Failed. Should I File Bankruptcy?”, Justin Harelik, July 31, 2013