Home based business and the effect of bankruptcy

Guest Post by Kevin Craig

Do you have your own home-based business and are facing the option to file bankruptcy? If yes, then you need to know that it can be a frightening scheme particularly if you are not sure how a bankruptcy will affect for you or your business. Read on to know how the different kinds of bankruptcy can affect a home based business.

Home business – What is it?

A home based business is a type of business that can be executed from your own home or if you have your office at home. The business may not have any employee and may be run by you only. The business is an only proprietorship, existing exclusively under the individual owner who is running the business, rather than as a distinct Limited Liability Company (LLC), corporation, Limited Partnership (LP) or other business entity. When a business is a sole proprietorship, there is usually no lawful difference between the business and the business owner. Thus, it is said that the assets of the business are the legal assets of the business owner.

Bankruptcy – What are its different types?

• Chapter 7 – A Chapter 7 bankruptcy enables for the insolvency of many kinds of debt. It also means that the bankruptcy trustee may settle many of the assets of the individuals in order to pay off several creditors before reducing the remaining debt. You may have a home-based business with assets that have a significant worth. The bankruptcy trustee may grab and clear up those assets in an effort to pay off what is owed to the creditors.

• Chapter 13 – A Chapter 13 bankruptcy offers a suitable way for an individual to re-arrange their debts into a payment plan that is approved by the court, probably by changing the terms of payment such as the rate of interest or the amount owed so as to make the payments within your means. After the terms of the payment plan are fulfilled, any remaining debt is usually eradicated. The impact to a home based business will be any income you earn from the business is considered in finding out what payment plan amount the individual can afford. The income will be used with other income that is earned by the business owner in order to satisfy the payment plan.

• Chapter 11 – A Chapter 11 bankruptcy gives relief in the same manner like Chapter 13 bankruptcy offers for an individual. However, Chapter 11 bankruptcy provides restructuring of a business which may consist of a home based business operated as a sole proprietorship. The impact Chapter 11 has on a business may differ broadly depending on the situation of the individual who file bankruptcy.

Filing for bankruptcy, being the owner of a home based business, may reduce the assets of business or effectively find out where any net income from the business has to be paid. If you have a home based business and you think that you need to file bankruptcy, you may have a talk with a bankruptcy lawyer. He will be familiar with the bankruptcy laws of your state, may ask you the necessary questions to recognize the particular home business you have, and with that information, suggest you of the impact the various kinds of bankruptcy will have on your home based business.

About the author: Kevin Craig is a financial writer associated with various finance related Communities. He has been providing advice on debt consolidation and debt settlement since 2007 and also written some great articles on bankruptcy, mortgage refinance, credit counseling, credit repair, debt management, personal injury and so on.