If you are a small business owner in New York struggling with cash flow issues, you are not alone. A bankruptcy petition may provide relief and help your business survive a setback.
Under certain circumstances, the court may require you to use your personal income and assets to pay for your company’s liabilities. Depending on the terms of a financial agreement, business creditors may have the right to file a lawsuit against you personally and demand payment on a defaulted business loan.
Petitioning to reorganize debts
If your business revenue suddenly dries up, you may need to consider filing a bankruptcy petition to prevent creditors from taking legal action.
Some creditors may provide your business with a temporary forbearance; most, however, may not offer much flexibility. When a loss of income prevents you from paying your business expenses and overhead, a Chapter 11 bankruptcy petition could offer your company a chance to reorganize its debts and stay in operation.
After filing a petition, your business could remain open, but your creditors may not harass or threaten to sue. As noted by CNBC, you may renegotiate business debts with your company’s creditors and repay them over time. A successful Chapter 11 petition could provide a solution for a company that expects to continue generating revenue but is experiencing a temporary hardship.
Filing a personal bankruptcy petition
A Chapter 11 bankruptcy covers your business debts, but if you provided a personal guarantee for your company’s financial obligations, creditors may hold you responsible even after filing a business bankruptcy.
Under these circumstances, you may wish to consider a personal Chapter 7 bankruptcy petition if you do not have the means to repay your business’s creditors. Generally, you may keep your house, car and other personal assets as you and your business move forward.