Federal laws allow businesses to file for Chapter 7, Chapter 11 or Chapter 13 bankruptcy. Typically, businesses opt to file Chapter 7 or Chapter 11 bankruptcy. Depending on the structure of a small business or sole proprietorship, they may be able to file Chapter 13 bankruptcy. The type of bankruptcy that ultimately provides the most benefits depends on a number of factors specific to the business.
If you’re a small business owner, it’s important to consider your future plans when deciding which type of bankruptcy to file. For example, if you want to discharge your debt without a repayment plan and get a fresh start, Chapter 7 bankruptcy may be the best option for you. However, if you plan on continuing to do business, you may want to file Chapter 13 bankruptcy so you can maintain relationships with your vendors and suppliers.