Companies fail daily, they fail so frequently that starting a business is one of the most risky financial decisions of any body’s life. Sometimes the risk pays off, but often times it does not and that’s understandable. If you are part of a failed company, the best thing you can do is take a breath and begin thinking of a way to salvage the situation. This may even include bankruptcy. Probably the most dreaded thing for any entrepreneur to even think about. However, with chapter 7 bankruptcy, a business owner can finally put aside that chapter of their life and begin anew.
Chapter 7 business bankruptcies works much like the conventional idea of bankruptcy, but it is much more compromising than most people may think. Upon approval of the bankruptcy petition and all other necessary financial documents, assets are divided into exempt and nonexempt assets. Nonexempt assets will be then be liquidated at auction and used to repay business debts. Exempt assets such as clothing, motor vehicles, and pensions are able to be kept to maintain a basic standard of living. Debts are then divided into secured and unsecured debts. Perhaps one of the most significant aspects with chapter 7 is the ability to discharge a majority of unsecured debts. These include any asset that is not secured with tangible property such as credit card debt and medical bills. If unsecured debts are unable to be discharged, many creditors will accept a reduced settlement amount for these debts which can be 50% lower than the original. According to Bradford Law Offices, PLLC, the majority of a company’s debts will in fact be eligible for discharge.
Businesses are difficult to own and operate, and it is inevitable that some companies are bound to fail. The thought of bankruptcy is hard for most entrepreneurs to stomach as they believe it is the mark of failure, but this is a unhealthy way of thinking. Bankruptcies need to be viewed as an opportunity for business owners to start over and create a better business from what you learned in the past.