What Small Business Owners Need To Know About Filing Bankruptcy

Today’s economic uncertainties have put a lot of small businesses at risk. And, even forced some into bankruptcy and to close to their doors. While this is a detrimental loss, it just an unfortunate part of doing business in today’s time. With that being said, if you feel like filing for bankruptcy is your only option to avoiding debt, there are quite a few risks that you need to be aware of before filing. The entire process is not just as simple as getting a lawyer and filing the motions. Below, you will learn some important information and tips that you need to know when it comes to filing for bankruptcy with your small business.

Steer Clear Of Borrowing Money

When many small business owners are facing the possibility of bankruptcy, they will turn to close friends and family for financial assistance. Maybe you borrow a few thousand here and there to pay off a creditor, or a pending bill. While there is nothing wrong with this, you should be aware of the fact that if you do file bankruptcy, your friends and family members are not going to get their money back. This is even true if your business assets are sold off, as all the proceeds will go to your creditors. And, the money borrowed from your friends and family members will be considered a gift.

Steer Clear Of Cash Advances On Credit Cards

Most small business owners like to take large cash advances on their credit cards right before filing for bankruptcy. They figure they are already in debt and since the bankruptcy will pay off the debt, they might as well splurge while they can. Unfortunately, this is not the things work and most credit card companies will view this as a fraud attempt. In a situation like this most of the time the bankruptcy trustee will throw your case out of court.

Remember That You Can Come Back From Bankruptcy

It is true that filing for bankruptcy can be disheartening and make you feel like you have failed, but this is not always the case. Sometimes the customers and the economy just do not react the way you had hoped. Whatever the situation is, you need to know that it is entirely possible to come back from bankruptcy. In fact, the Better Credit Blog explains how to remove a bankruptcy. Just look at some of the most successful businessmen in the world, and you will probably find out that they have filed bankruptcy at least once or twice in their long and lengthy careers.

Avoid Paying Off Your Vehicle Loans

If you have a company vehicle or two, you might be under the impression that you are going to get to keep these vehicles. In fact, many small business owners make the same assumption. So, they rush off and pay off their loans on the vehicles as fast as they can before filing for bankruptcy. However, the truth is that you are only going to get to keep so much equity in the vehicle, which is usually right around $1000 to $5000. Any more of the equity will be spent on paying off your creditors.