Archive for September, 2011
Business Bankruptcy 101: 5 Need-to-know Tips About Small Business Bankruptcy
Closing down your business is tragic, especially when the action is prompted by an insurmountable debt problem. Not only do you have to grit your teeth through an unsettling array of emotions, but you must also seek protection from those persistent creditors. If you’re thinking about bankruptcy, here are five tips to help you understand what lies ahead.
You may not be able to exclude your personal debts from the bankruptcy. If your business is a proprietorship, you cannot obtain bankruptcy protection solely for the business. The finances of your business are considered a subset of your personal finances; therefore, your bankruptcy filing would generally cover all of your debts—not just the ones related to your business.
If your business is a corporation, limited liability company (LLC) or a partnership, the business can file its own Chapter 7 or Chapter 11 bankruptcy petition. This filing would not affect your personal finances.
Your personal assets may be at risk if the business is a partnership. Although a partnership is a standalone legal entity, the court may sometimes use the partners’ personal assets to pay off creditors. Check your credit agreements for personal guarantees on the partnership’s debts, and get solid legal advice before proceeding.
You may not have to shut down your business. You can reorganize your corporation, LLC or partnership under Chapter 11. If the business is a proprietorship, you can reorganize your personal finances, including the business, under a Chapter 11 or Chapter 13 bankruptcy. Reorganization is an option when the business’s primary problems are related to burdensome debt payments or other contractual obligations. A bankruptcy reorganization is not an option when sales and/or margins are too weak to support ongoing expenses.
Reorganization isn’t always the best option, even when the business just needs to be reorganized. A Chapter 11 reorganization bankruptcy proceeding will sap a lot of your time and energy. Consider whether you able to meet the bankruptcy court’s demands while continuing to run your business effectively. Depending on the structure of the business, it might be more efficient to liquidate and start over. You would have to start with new money and, preferably, a new business name.
Corporations, LLCs and partnerships do not get a discharge. Businesses that are legal entities have no “clean slate” option; they must either liquidate under Chapter 7 or reorganize. In a liquidation, the business is closed and the assets are sold to pay off creditors. In a reorganization, the debts and contracts are restructured so the business can pay back the money owed.
A “clean slate” discharge is only an option in individual Chapter 7 cases. If you are a sole proprietor, your business-related debts could be discharged through Chapter 7—but this is because they are your personal debts in a legal sense.
Written by BrockComm
Personal Finance: How to Manage Your Money While Unemployed
Managing your finances when you are between jobs is tough. You have to consider the overall economy, the reason for your unemployment, your skill set, and estimated length of unemployment. The economy is a determining factor since you may apply for unemployment benefits via your state. The estimated time frame is 24 weeks with the possibility of extension for an additional 24 weeks but if the economy has a high unemployement the probability for an extension is limited.
The reason for your unemployment is important. For example, if your company was part of a well-known, massive layoff/merger/acquisition you may have received a generous severance package. You would be able to maintain fixed expenses such as rent/mortgage, property taxes, and homeowner’s insurance using your severance while keeping your unemployment separate for postponed/variable expenses such as dining out, entertainment, and travel.
On the other hand, it is rare to obtain a generous package so your unemployment may be your only income for both fixed and variable expenses. Remember, it will run out. While searching for a new job, check with an unemployment expert to see if you can go back to school for a short-term certificate in a promising field such as computers, technology, education, and medicine. Also, check with your state to determine if you can start a homebased business for minimal costs instead of seaching for a traditional job.
Your skill set is critical. For instance, if you are a registered nurse who lost her job because of a merger you will obtain a job offer sooner because of the national shortage of good nurses and you may receive better pay/benefits/work-life options. You may still choose to enjoy an expensive two week vacation. However, a low-skilled clerical worker who has enormous competition needs to forego a vacation and hit the books.
Managing your finances will be a challenge so I hope these tips help
Written by Cherrineb