Running your own business is challenging and rewarding. However, if money gets tight or debt becomes an issue, your business may not be the only thing to suffer. You may find your personal finances are in jeopardy too.
In light of the increasing struggle you are experiencing with your company, you may be weighing your options for debt relief. Depending on the way in which you set up your business, you may be able to escape the net of debt easily by simply closing down your operations. However, if your personal finances are tied up in the company, you may face a more complex problem.
Things don't go as planned
If you set up your business as a limited liability corporation, you may have thought you had insulated your personal finances from any debts your business may incur. The problem is that, in order to protect your family's budget from business creditors, you have to avoid using any personal funds for your business.
This is not always easy when starting a new company. You may have needed to sign a personal guarantee or use your home or other assets as collateral for a start-up loan. If you did this, those assets may be on the line for your company's debts, even if it is an LLC.
Debt relief options
Often the best way to protect your personal world from your business creditors is to file for bankruptcy. Chapter 7 will liquidate your business, but Chapter 13 may allow you to continue operating while working through a payment plan. The court may determine which is best for your situation by taking these factors into consideration:
- Your income
- Your assets
- The amount you owe
- Your financial goals
For example, if you have very little income and few assets but your debt load is heavy, the court may decide Chapter 7 will be the best option for you. The court may lean toward Chapter 13 if your debt is lower but you have adequate income and assets.
What's best for your circumstances?
If your business is struggling and you worry that its debts may compromise your home and personal assets, you may find comforting guidance in speaking with an attorney. A Texas bankruptcy attorney will help you assess your options and determine the best steps for you to take in your situation.
Regaining control of your finances is the goal. Having professional help may improve your chances of finding a positive resolution for your business and your family.