Business Bankruptcy and Alternatives
Compare business bankruptcy to alternative debt reduction
Small business may file either Chapter 7, 11, or 13. If operating as a sole proprietorship however, the restrictions for qualification under Chapter 7 and 13 - that apply to individuals - may also restrict relief granted. In general, any person or corporation may file Chapter 7, while partnership interests and ventures are considered as an asset owned by individual partners. Because of this presumption, an individual partner may file alone, yet the interest owned will be administered by a Chapter 7 trustee and may include asserting partner rights for liquidation, dissolution or division of property owned by the partnership. Despite contract provisions and waivers to the contrary, business bankruptcy alternatives survive unaffected.
In the case of any two given partners, few possess identical financial strength. Unexpected losses or lawsuits frequently result in one partner filing for bankruptcy while leaving their other alone to deal with partnership liability. Because of this unequal and unexpected eventuality, limited partnerships are generally far more preferable even though requiring greater filing requirements and legal maintenance to preserve the integrity of the entity. In general partnerships, liability owed to third parties remains even though one partner files Chapter 7, whereas, if choosing a limited partnership, only the partnership interest owned by each limited partner is subject to loss.