From coming up with innovative products and services to handling the nitty-gritty details of daily logistics, small business owners work hard to make their visions reality. That determination to succeed often involves personal sacrifice, including putting up private assets as collateral to finance the dream.
Unfortunately, even the best ideas do not always work out. According to the Small Business Administration, nearly half of all new businesses fail within the first five years, often due to circumstances beyond the owner’s control. When private assets are on the line and an owner has taken on personal debt, that can be a devastating prospect.
In many cases, filing for either Chapter 13 or Chapter 7 bankruptcy may be the best choice to help protect an owner and his or her family personally from business-related debts.
Filing for Chapter 7
In situations where an owner cannot keep the business open and he or she is facing insurmountable debt, filing for Chapter 7 bankruptcy may be an option. For those who qualify, this process allows an individual to discharge unsecured debts, such as credit card or medical debt. While many people find the idea intimidating, in some cases this type of filing may be the best way to regain financial freedom from overwhelming payment burdens.
Filing for Chapter 13
A successful Chapter 13 filing allows individuals who are not eligible for Chapter 7 to reorganize their debt while keeping certain personal assets, such as a home or car, and continuing to operate their business if they choose. This process often sets up a three- or five-year repayment plan that makes monthly bills more manageable, offering a lifeline to those struggling to make the numbers add up.
Considering your options
For many small business owners, a failed venture is also a failed dream. Feelings of shame can make it difficult to deal with financial problems head-on, even as debts mount. Instead of allowing the emotional and financial burden to grow, those facing overwhelming payment commitments may want to consider speaking with an experienced professional about how filing for bankruptcy may help.