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Bankruptcy can be a strong remedy for a failed small business

Persons with failed small businesses in Florida and elsewhere often need critical assistance to weather the aftermath of closing the operation. In such cases, they may have personal consumer debt, such as credit cards, that they borrowed on to bolster the business. The individual may also have signed judgment notes to personally guarantee business or other types of personal loans. That scenario can be an ideal candidate for substantial debt relief in a bankruptcy filing.

Under the Bankruptcy Code, there are certain limitations in income and other considerations that may make an individual or a married couple ineligible for bankruptcy relief. The best way to find out is to consult with a consumer bankruptcy attorney. If qualified, the filing will more than likely be a Chapter 7.

The business debt and consumer debt will be listed and all debt that is unsecured will be generally discharged. Any credit card debt, hospital expenses and other unsecured debt will be discharged quickly and permanently, without making payments. The judgment notes that may have been signed to back up a budding business enterprise will generally be dischargeable and erased in a bankruptcy.

The quick and permanent discharge of debt described above takes place mainly in a Chapter 7 bankruptcy. This is called liquidation, or straight, bankruptcy. Theoretically, the filer's assets are used to pay back the creditors in a Chapter 7.

However, for most consumer filers in Florida, there are ample exemptions that will exempt all or most property from being liquidated. Even homes, cars and bank accounts are exempt in certain instances. There are adequate provisions for keeping one's personal belongings, furnishings, computer and electronic items, and miscellaneous household property. Again, the best way to assure oneself of the qualifications and impact of a bankruptcy is to consult with an experienced consumer bankruptcy attorney prior to making any decisions or taking any actions with respect to one's creditors.

Source:, "Preparing for personal bankruptcy", Karin Price Mueller, March 7, 2017

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