You may be considering filing for bankruptcy in Georgia if your business debts have become insurmountable. If so, the next question you face is whether you should file bankruptcy on behalf of yourself or your business. Our personal bankruptcy attorneys in Atlanta have helped thousands of clients make the best choice for their situation.

Understanding Chapter 7 Bankruptcy as a Business Owner

Chapter 7 bankruptcy eliminates most debts except for the following:

  • Alimony
  • Child support
  • Debts you recently incurred to purchase luxuries
  • Divorce settlement agreements
  • Fines and restitution imposed by a court in a civil or criminal case
  • Student loans
  • Overdue taxes
  • Taxes imposed on a trust fund

Keep in mind that the bankruptcy court may try to sell some of your assets to raise money to pay your creditors if you qualify for this type of bankruptcy. The average timeline for filing and discharging a Chapter 7 bankruptcy is three to six months.bankruptcy attorney

Whether Chapter 7 bankruptcy is the right choice for your business debts depends on these factors:

  • The amount and type of personal assets you are attempting to protect through bankruptcy
  • The legal organization of your business
  • Types of debt you have incurred

Filing for Chapter 7 bankruptcy as a sole proprietor is typically a simple and straightforward process. The reason for this is that the state makes no distinction between you and your business. Should you choose to proceed with filing for Chapter 7 bankruptcy, it will eliminate most of your business and personal debt.

The situation becomes slightly more complex when you registered your company under a different type of business structure. For example, personal bankruptcy will not wipe out your business debts if you are registered as a limited liability company (LLC) or corporation. However, a discharged Chapter 7 bankruptcy does remove your liability for paying business debts.

Rules for Chapter 7 Business Bankruptcy

When consumers file personal bankruptcy, they must meet certain income and other financial criteria to qualify. This does not apply in business situations unless your business debt is less than 51 percent of the total debt you want to claim in bankruptcy.

In that case, you would need to complete the means test for Georgia. The means test requires that your income falls within guidelines determined by the state. The annual income requirement for one person is $40,631. For a family of four, the maximum annual income jumps to $68,085. The state means test also allows you to claim several exemptions, such as your home and car.

You cannot file for business bankruptcy in Georgia if your business debt is 49 percent or less of the total debt or your income is higher than state guidelines. However, you can still file for Chapter 13 bankruptcy. With this type of bankruptcy, you submit a payment to the bankruptcy court that a clerk then divides among your creditors. Most court-approved plans for Chapter 13 bankruptcy give debtors three to five years to repay all creditors. They cannot take any action against you during that time.

What Becomes of Your Business Assets After Chapter 7 Bankruptcy?

If you are a sole proprietor and plan to continue in the same line of work, the state will allow you to keep equipment considered necessary to your trade. You may also receive a lump sum exemption to apply to the business assets you most want to keep. Georgia allows bankruptcy petitioners to protect up to $10,000 of miscellaneous assets, referred to as the wildcard exemption.

When the owner of an LLC or corporation files for personal bankruptcy, a trustee for the bankruptcy court can take over your membership shares or interests. Taking this action enables the trustee to sell your business or liquidate its assets to raise money for creditors. Trustees consider the value of each asset and whether it would benefit the court to sell it.

Most of the time, the debts of a business filing for bankruptcy are close to or more than its assets, meaning a bankruptcy trustee will not sell them. However, a trustee may decide to dissolve your corporation or LLC and sell any valuable non-exempt assets if your business has little debt.

As personal bankruptcy attorneys in Atlanta, we understand there is a lot of information to process. Please schedule a consultation with Clark & Washington to learn more today.