The very last thing you want to think about as a small business owner is the idea of insolvency. You didn’t start your business with the idea that you might have to fold. But sometimes bankruptcy might be just what you need to keep going, to start a new venture, or to protect the assets you still have. The three most common options for businesses are Chapter 7, Chapter 11, and Chapter 13.

One of the reasons for filing for bankruptcy is to stop collection proceedings and work out repayment arrangements, where possible. If you are a sole proprietor, you are not legally considered a separate entity from your business, and you will need to file as an individual. However, if you have set up a corporation or LLC, you will be able to file as a business and won’t be considered personally liable for any of the business debts.

Chapter 7

Filing for Chapter 7 is usually done by LLCs, corporations, and partnerships. In some cases, you may also file for Chapter 7 as a sole proprietor. In this type ofproceeding, a trustee is appointed to manage the sale of any remaining non-exempt assets to pay creditors. Not all of the property will be eligible for sale, for example, if it is under lien by other creditors.

Chapter 11

Chapter 11 bankruptcy proceedings can be complicated and are usually only entered into by larger companies who need to restructure but intend to stay in business. It can be very time-consuming, and even expensive. It’s also risky, as there are plenty of tax laws that need to be observed. There are some provisions for small businesses who wish to file Chapter 11, but it’s best to have a tax lawyer or accountant advise you on the ins and outs.

Chapter 13

As an individual or sole proprietor, Chapter 13 might be the best option for you. Only individuals are eligible for Chapter 13. You will be required to repay the debts you’ve accrued, usually over a period of about three to five years. However, this will only eliminate your personal debt, and doesn’t take care of the company debt. You may still need to sell off the company’s assets in order to take care of company debt.

Filing for bankruptcy can be a stressful and upsetting process, and isn’t something to be considered lately. However, in some cases, it may be your best solution for managing debt that you are unable to repay. Educate yourself about the options available to you and don’t be afraid to seek out help when you need it.