The Pros and Cons of Filing for Personal Bankruptcy as a Small Business Owner

Filing for Bankruptcy Papers

Filing for bankruptcy is something that is not often understood by the general public. Some have the common misconception that it is a way for you to get out of debt and start over. However, the truth is much more complicated. A lot depends on what type of debt that you have, and what type of assets you have. Depending on your situation, filing for personal bankruptcy could help you out, but it could also hurt you severely.

The Pros

Filing for bankruptcy can put an end to various problems, though the details and specifics will change depending on whether you’re filing for chapter 7 or chapter 13 bankruptcy. One of the biggest benefits is that you get immediate temporary relief. As soon as you file for bankruptcy, no further action may be taken against you by your creditors until a decision in your case has been reached. Even if your case decision requires you to pay some of your creditors, you will often be protected from fines for late payments. In some cases, your debts may be canceled or reduced. However, that isn’t guaranteed.

The Cons

Depending on the decisions and agreements reached in your bankruptcy case, you could lose valuable assets. These could be items like your home, car, and other things that could be used to help settle your debts. Bankruptcy isn’t free either. You are going to have to pay fees for the court services. You won’t even have all of your debts taken away. Student debt, taxes, child support, fines, and many other financial obligations won’t be removed. Even the debts that you get relief from can still haunt you. If you have friends or family members that are cosigners on any of your accounts, your creditors will still be able to go after them and demand that they pay your debts. This will undoubtedly strain your relationships. All in all, you will be losing trust in your business and personal relationships because you have failed to meet your obligations.

How to Decide

Deciding to file for bankruptcy is going to be tough. Even though your financial situation is strained, it may be worth speaking with a lawyer and/or an accountant to help you make the decision. They will be able to give you a good idea of whether bankruptcy is going to help. Be aware that you cannot lie or fudge the numbers to give yourself a better case. Doing so is a crime and could easily cause you to end up in jail.

While bankruptcy shouldn’t be taken lightly, it isn’t something that you should avoid at all costs. If your situation is financially dire, bankruptcy can be your path to a new start. The purpose of this process is to help people to get out of nearly impossible situations. The reason that the process is so stringent and complicated is to prevent people from gaming the system.

Read this next: How to Become a Better Manager: 4 Practical Tips


All Categories

Business Operations

Entrepreneur Interviews

Marketing, Networking, & Social Media

Self Care & Personal Development

Working Moms

Business Software and Technology

Entrepreneurship & Small Business

Organizing Tips


Career Building

Family Businesses


Starting Your Own Business

Work-Life Balance


Hiring Help

Management & Leadership

Time Management & Priorities

Women in Leadership

Recent Posts

Business Blogging 101: How to Create and Sustain a Successful Blog

Business Blogging 101: How to Create and Sustain a Successful Blog

For businesses, business blogging is becoming a powerful tool to not only attract and engage new customers but also to build brand authority and ultimately grow your brand.
This comprehensive guide will equip you with the essential knowledge and strategies you need to start and succeed in the dynamic world of business blogging.

How to Protect Your Merchandise From Theft

How to Protect Your Merchandise From Theft

Protecting your merchandise from theft is a critical aspect of running a successful business. In a world where security threats are ever-present, safeguarding your inventory is essential. Not only does it protect your bottom line, but it also ensures the safety of...

Experts You Need to Have at Your Business

Experts You Need to Have at Your Business

In the dynamic world of business, having the right team of experts is not just beneficial; it is essential for success and growth. For female leaders who are carving out their paths in business, marketing, or HR, knowing which experts to have on board can make a...

7 Tips for Asserting Yourself as a Woman in a Medical Workplace

7 Tips for Asserting Yourself as a Woman in a Medical Workplace

As a woman in a medical workplace, you have a lot of responsibility, not just to yourself but to other women who will come along after you. Asserting yourself in your workplace and gaining the respect of other employees and leadership is essential to a successful career. You have worked hard to get where you are, you don’t want to lose momentum.

Continue to grow with online leadership training and more. Follow these tips to assert yourself in the medical workplace.