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Can small business debt be discharged in a bankruptcy?

Anyone who starts a business in today’s economy is taking a risk, and it may be that your sole proprietorship in Florida is not doing as well as you had hoped. In fact, if you are struggling to make the payments on your loans, building costs and overhead, you may be wondering if it is time to go a different direction in your career. Bankruptcy could be a viable option for you when you are ready to find relief from the overwhelming debt and expenses that can attend running a small business.

According to Chron.com, if your business is a sole proprietorship, you may qualify to file a personal bankruptcy. If so, a Chapter 7 bankruptcy would result in the dissolution of your business and the liquidation of your assets. It would be the responsibility of a court-appointed trustee to sell any property you have that is non-exempt, and then distribute that money to your creditors. Whatever debts are left over would be discharged in the bankruptcy.

There are a number of things you would need to provide when you file a bankruptcy petition, including the following:

  • Lease and contract information

  • Lists of business liabilities and assets

  • Income and expenses report

Once you have begun the process, an automatic stay goes into effect. At that point, you should immediately feel some relief from the pressure you may be getting from creditors over past-due payments and other expenses. Not everyone qualifies for Chapter 7 bankruptcy, and some business owners may choose Chapter 13 or Chapter 11. Determining what is right for your business is a personal choice, and this information may help you to understand what to expect. However, it should not be taken as legal advice.

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