Owning a small business can be very costly, as it can be hard to compete with big companies. If you are struggling financially with your business, it is important to know that bankruptcy is an option. Bankruptcy can help you get a fresh start for your business or liquidate your assets for closing. In this blog, we will be going over the different bankruptcy options available for small business owners, specifically in Georgia, to help you navigate the financial situation of your business with confidence. 

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Understanding Bankruptcy Options for Small Businesses

There are a few different types of bankruptcy options available for you to choose from as a small business depending on your circumstances.

Here is an overview of the options and eligibility criteria: 

  • Chapter 7 Bankruptcy: Chapter 7 bankruptcy involves the sale of a business’s non-exempt assets to pay off creditors. This type of bankruptcy is designed to liquidate the company’s assets, pay off as much debt as possible, and close the business.
    • Eligibility criteria: The business must not be a corporation or partnership, and the owner must prove that they are unable to repay their debts.
  • Chapter 11 Bankruptcy: Chapter 11 bankruptcy gives the business owner a chance to restructure their debts by creating a payment plan while continuing to stay open.
    • Eligibility criteria: Any business, including corporations and partnerships, can file for this type of bankruptcy. They just need to be able to show they can create an obtainable payment plan.
  • Chapter 13 Bankruptcy: Chapter 13 bankruptcy is typically only for individuals, but it can still be an option if you are a sole proprietor. This type of bankruptcy is similar to Chapter 11 as it involves creating a repayment plan to pay off debts over time while keeping the business open. In this case, the business debts are combined with personal debts.
    • Eligibility criteria: The individual must have a regular income and unsecured debts under a specified limit.

The Bankruptcy Process in Georgia

Once you have evaluated your bankruptcy options, you can begin to file for bankruptcy. In order to file, you will need to gather important documents regarding your business and financial situation. 

Here are some of the documents you will need: 

  • Financial Statements: Balance sheets, income statements, and cash flow statements.
  • Tax Returns: Most recent tax returns and any relevant business tax documents.
  • List of Creditors: Names, addresses, and amounts owed to all creditors.
  • Business Records: Articles of incorporation, partnership agreements, and any other relevant documents.
  • Proof of Income: Bank statements, pay stubs, or income statements.

Once you have gathered all relevant documents relating to your business, you can start the bankruptcy process. This process involves many complex steps and varies on which type of bankruptcy you are filing for.

Here is a brief overview of the initial steps for any form of bankruptcy in Georgia:

  1. Credit Counseling: Credit counseling is a required step and must be completed 180 days before filing. This can be done through an approved agency.
  2. File the Bankruptcy Petition: Complete the bankruptcy petition and schedules (including assets, liabilities, income, and expenses) and submit the petition along with your supporting documents to the U.S. Bankruptcy Court in Georgia (Northern or Southern District, depending on your location). You may also need to pay a filing fee.
  3. Attend the Meeting of Creditors (341 Meeting): You are required to attend a 341 meeting. This meeting is where creditors ask you questions about your financial situation and bankruptcy filing. Make sure to be honest with your creditors.
  4. Follow Court Orders and Requirements: After filing, it is important to follow all court orders and deadlines set during the bankruptcy process. You may also be required to attend debtor education courses as ordered by the court.

Consider Professional Help With Bankruptcy in Georgia 

The process of filing for bankruptcy differs from case to case, making it a difficult process to navigate on your own. It can be extremely helpful to consult with a bankruptcy attorney if you are considering filing for bankruptcy. 
If you have questions or want further details about the process of filing for bankruptcy, contact the legal team at Duncan & Brow, Attorneys at Law, LLLP, today. Our bankruptcy attorneys can carefully assess your circumstances, suggest the legal options that would work best for you, and assist you in navigating this challenging time.