Many businesses operate under the direction of one central owner who makes all pertinent operating decisions for the most part. These are called sole proprietorship entities where the owner is basically indistinguishable from the company. Just as with a corporation or a limited liability company, the Chapter 11 bankruptcy option applies to them as well when wanting to pay off liabilities and restructure the company. The problem is that the owner can be held liable along with the company when they decide to take bankruptcy protection. This applies to many Texas business owners in the Dallas/Fort Worth area who are experiencing cash flow issues in their operation.
Disadvantages of a Chapter 11 bankruptcy petition
There are two basic problems with filing for Chapter 11 bankruptcy protection. The first is time and expense. A Chapter 11 filing includes detailed company information, which in turn is more time intensive and expensive as a result. However, another problem of liquidation exists as well, and the trustee has the authority to seize and sell certain personal assets just as in a Chapter 7 petition.
Filing Chapter 7 as an option
The alternative to a Chapter 11 business bankruptcy is filing a personal Chapter 7 petition. This uses the connection between the business and the sole proprietor owner to best advantage because it can also include all personal unsecured debt such as credit card delinquencies. This cannot only put the business back in better financial standing, but it also accomplishes the same for the owner.
It is important to remember that the purpose of the bankruptcy laws is to give the petitioner an opportunity for a fresh start on their financial health.