Maryland small business owners operating as sole proprietorships may file for personal bankruptcy. If your business faces overwhelming financial hardships, you may file a petition for a Chapter 7 bankruptcy, as noted by Business.com.
If you applied for credit cards or consumer loans to fund your startup, you may have personal liability for your business debts. Creditors may file a judgment for unpaid balances against you directly if your business did not produce the income you anticipated.
When may a business owner file for Chapter 7?
Because a Chapter 7 bankruptcy may affect a filer’s credit for up to 10 years, many business owners attempt to resolve their debts on their own. After contacting your creditors and explaining your circumstances, some may agree to work out a payment arrangement so that you could catch up.
If you own your home, you may refinance a mortgage or request forbearance, as described by the Consumer Finance Protection Bureau. If these options do not prove fruitful, you may consider filing for Chapter 7 bankruptcy.
Which assets may I keep with a Chapter 7 bankruptcy?
With Chapter 7, the bankruptcy court may require liquidating valuable assets to repay your debts. If you plan to restart or continue operating your business, however, you may need to claim an exemption to keep some assets.
As noted by Bankrate.com, you may file an exemption to hold on to your vehicle if its equity is worth no more than $4,000. The U.S. Bankruptcy Code also allows you to keep tools of the trade valued at no more than $2,525.
As described by the U.S. Small Business Administration, sole proprietorships do not separate their owners from the business. If you have personal liability for overwhelming business debts, however, you may consider a personal bankruptcy as an option to regain ground.
