Can I Keep My Business While Filing for Bankruptcy?

Can I Keep My Business While Filing for Bankruptcy

Filing for bankruptcy is a daunting prospect for any business owner. The thought of losing your hard-earned business and assets can be overwhelming. However, bankruptcy doesn’t always mean the end of your entrepreneurial journey. In this article, we’ll explore the various types of bankruptcy and how they can affect your business, along with important considerations for business owners in Maryland.

Answering The Question: Can I keep My Business While Filing for Bankruptcy? 

The Different Types of Bankruptcy and How It Can Affect Your Business

When faced with financial difficulties, business owners often wonder if they can keep their business afloat during the bankruptcy process. The good news is that the federal bankruptcy code provides options to help businesses reorganize and continue operations. Let’s delve into some of these options:

Chapter 11 Bankruptcy

Chapter 11 bankruptcy is primarily used by businesses to reorganize their debts. Whether you operate a limited liability corporation, partnership, or joint venture, you can generally continue business operations during a Chapter 11 bankruptcy. The key is to develop a repayment plan that satisfies your creditors, which, when approved by the court, allows your business to operate. You’ll typically have up to five years to fulfill the terms of the confirmed plan. 

Additionally, the Small Business Reorganization Act of 2019 has made Chapter 11 filing more affordable for small businesses, opening up this option for many.

Individuals also have the option to file for Chapter 11 bankruptcy in addition to registered entities, making it a versatile choice for those seeking to retain their business.

Chapter 13 Bankruptcy

Sole proprietors who own and operate their businesses can turn to Chapter 13 bankruptcy to restructure their debt and devise a repayment plan. This option allows sole proprietors to continue running their businesses while avoiding the liquidation of business assets. If you believe your business still holds potential and you wish to protect it from liquidation, Chapter 13 may be the right choice. It can also be suitable if you own all or part of a limited liability company or corporation and want to safeguard your ownership interests.

However, it’s important to note that businesses like limited liability companies and corporations cannot file for Chapter 13 bankruptcy.

Chapter 7 Bankruptcy

Chapter 7 bankruptcy typically applies to individuals and businesses with overwhelming debts compared to their income. In this form of bankruptcy, a trustee is appointed to assess various issues, including the possibility of asset liquidation. The outcome for your business in a Chapter 7 bankruptcy largely depends on the type of business you operate:

  • Sole Proprietorship: Service-oriented sole proprietors have a better chance of retaining their businesses compared to product-oriented ones. However, if there is value to be obtained from assets such as accounts receivable, bank account deposits, tangible and intangible assets, the trustee may choose to shut down and/or sell the business.
  • Limited Liability Corporations (LLCs) or Corporations: In the case of LLCs and corporations, the trustee typically shuts down the business and may liquidate assets to pay off the company’s debts.

Will Multiple Bankruptcy Filings Be Necessary?

Many business owners have personal liability intertwined with the debts of their registered entities. Depending on the specific circumstances, it may be advisable for both the individual and the incorporated entity to file for bankruptcy. Consulting with a bankruptcy attorney is crucial to determine the best course of action for your unique situation.

Questions To Ask A Bankruptcy Attorney in Maryland When Meeting With Them

When seeking guidance from a bankruptcy attorney in Maryland, here are eight essential questions to consider asking:

  1. What type of bankruptcy is most suitable for my business?
  2. How will bankruptcy affect my business operations and assets?
  3. What is the process and timeline for filing bankruptcy in Maryland?
  4. Can I keep any of my business assets during bankruptcy?
  5. What are the eligibility criteria and requirements for different bankruptcy chapters?
  6. How will bankruptcy impact my personal liability for business debts?
  7. Are there any alternatives to bankruptcy that I should explore?
  8. What fees and costs should I expect when working with your firm?

Need Help Navigating Your Bankruptcy Options?

If you’re facing financial difficulties and considering bankruptcy in Maryland, it’s essential to consult with a knowledgeable attorney who can guide you through the process and help you make informed decisions. At The Law Offices of Nicholas J. Del Pizzo, III P.A. in Baltimore, Maryland, we offer personalized attention and seven-day-a-week availability to address your legal needs. Our experienced attorney, Nick Del Pizzo, is dedicated to seeking the best resolution for your case, whether it involves bankruptcy, foreclosure, personal injury, or medical malpractice. Your case becomes our cause, and we’re here to assist you in finding the best path forward.

Scroll to top