There are more than 2.4 million small businesses in Florida, employing more than 3.2 million people. If you are one of them, you might be wondering if bankruptcy is an option to reduce your debt.
Depending on how your business is legally categorized, you’ll be able to file a Chapter 7, 11, or 13 case.
An experienced bankruptcy lawyer in Jacksonville can help you determine if bankruptcy is your best alternative. Because Florida is a homestead exemption state, there may be some other things to keep in mind, as well. Each of these can have different effects on your business.
In the US, there are a few different types of bankruptcy filing categories, called “Chapters.”
Chapters 7 and 13 are usually used by individuals for personal filing. Chapter 11 is used for businesses. These can all mean different things for a small business in Florida.
Chapter 7 bankruptcy is rarely used by LLCs or corporations because they will close those businesses down.
A Chapter 7 bankruptcy is also known as liquidation bankruptcy. It is what most people think of when they hear the term. Essentially, a trustee is appointed by a court to take your assets and sell them to creditors to cover the debt.
In the case of a small business in Florida, this often means a shutdown of your company.
As a result, it is rare for businesses to file Chapter 7 bankruptcy. Usually, the trustee will sell the business and its assets to the creditors.
There are limited exemptions that may be provided for “tools of the trade,” or items essential for an individual’s work. This type of filing might work for a sole proprietor who provides a specific service.
A Chapter 13 filing can only be done by individuals. This means you won’t be able to file on behalf of a company or LLC.
However, it could still be something you consider if you own a small business in Florida.
This type of filing is usually done by higher income earners who have larger estates to protect.
If you are personally responsible for business-related debts, those can be considered as part of the Chapter 13 bankruptcy. This means a sole proprietorship can also benefit from a Chapter 13 filing.
A Chapter 11 filing is specifically for businesses, and it is the only reorganizing option for LLCs, partnerships, or corporations.
It allows businesses to keep running after filing bankruptcy, and it works the same for both large and small businesses.
Small business Chapter 11’s cost considerably more than a Chapter 13 but considerably less than lager Chapter 11’s. Unlike most Chapter 7’s and 13’s, a Chapter 11 debtor’s lawyer charges hourly, and he must get his fees approved by the Court.
So, the complexity of the Chapter 11 will determine the cost.
If you lived in Florida for at least two years, the state’s bankruptcy laws will apply to your case.
Because it is an “opt-out” state, federal exemption laws do not apply in Florida. However, Florida has some of the most generous homestead exemption laws in the country. In Florida, your residence is exempt no matter how much it is worth.
This means that you won’t have to worry about it being sold to cover business debts. This exemption only applies to primary residences and not secondary residences that you may own.
Dealing with bankruptcy as a small business doesn’t have to be a single-person job. The bankruptcy lawyers at Parker & DuFresne will help you determine the best course of action to help you get out from under your debt and move forward to a debt-free future. Call today at 904-733-7766 for a free consultation.
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