Category Archives: Business debt

Navigating Income and Business Taxes with Bankruptcy: A Guide to Empowering Your Business for Sustainable Growth

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Is your small business grappling with tax challenges that seem insurmountable? Explore the potential of bankruptcy as a lifeline for managing income and business taxes while propelling your business forward in the competitive market.

Small businesses today often face financial hurdles, with mounting tax debts serving as a significant obstacle. These obligations not only stifle growth but also hamper day-to-day operations, leaving business owners feeling overwhelmed and uncertain about their future prospects.

However, there’s a strategic avenue available to regain control over income and business taxes: bankruptcy. By addressing back tax debts through bankruptcy proceedings, businesses can negotiate improved payment terms and alleviate financial burdens, thereby laying the groundwork for sustainable growth and long-term success.

Let’s delve deeper into how bankruptcy can empower your business:

  1. Debt Relief: Bankruptcy offers a structured framework for resolving tax debts, providing much-needed relief from overwhelming financial obligations. Whether through Chapter 7 liquidation, a Chapter 13 repayment plan, or Chapter 11 reorganization, businesses can restructure or eliminate tax debts, offering a fresh start and renewed financial stability.
  2. Negotiated Terms: Filing for bankruptcy empowers businesses to negotiate favorable terms for repaying back taxes. This could involve working through extended payment schedules, reduced interest rates, or even securing partial debt forgiveness, enabling businesses to manage their financial obligations more effectively and regain solid footing.
  3. Preserving Assets: One of the critical benefits of bankruptcy is safeguarding business assets from seizure or liquidation. This protection ensures that essential resources required for ongoing operations remain intact, allowing businesses to continue operating and pursuing growth opportunities without the looming threat of asset forfeiture.
  4. Rebuilding Credit: While bankruptcy may initially impact credit ratings, it also presents an opportunity for rebuilding credit over time. By adopting responsible financial management practices post-bankruptcy, businesses can gradually restore their creditworthiness, paving the way for accessing new financing options and opportunities for expansion.
  5. Focus on Growth: By addressing tax debts through bankruptcy, businesses can redirect their focus towards growth and innovation. With improved financial stability and reduced debt burdens, businesses can allocate resources towards expanding operations, enhancing product offerings, and seizing new market opportunities.

In conclusion, navigating income and business taxes through bankruptcy can serve as a transformative step towards securing the future success of your small business. By leveraging bankruptcy as a strategic tool for managing tax debts, businesses can overcome financial challenges and emerge stronger and more resilient than ever before.

Discover how bankruptcy can empower your business to thrive amidst tax challenges. Take proactive steps towards a brighter and more prosperous future by exploring the potential benefits of bankruptcy for your business’s financial health and long-term growth strategy.

Schedule a free bankruptcy consultation with Jennifer Weil, a New Jersey bankruptcy attorney, to discuss your options.

Chapter 7 Bankruptcy After Closing Your Business – Factors to Consider

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Meta Description: Filing for Chapter 7 bankruptcy after shutting down your business may seem like the best option, but there are three key factors to consider: assets, taxes, and other non-dischargeable debts. Consult with a lawyer to determine what’s best for you.

Introduction:

Closing down a business can be a difficult and emotional experience. After all the hard work and effort put into making it successful, it can be tempting to file for Chapter 7 bankruptcy for a fresh start. However, it’s important to consider the consequences before making a decision. In this blog post, we will discuss three factors to consider when deciding whether Chapter 7 bankruptcy is the right choice for you after closing your business.

  1. Business Assets:

Chapter 7 bankruptcy is divided into two categories: “no asset” and “asset.” In a “no asset” case, the Chapter 7 trustee decides that none of your assets are worth taking and selling to pay creditors. On the other hand, if your recently closed business has assets that are not exempt and are worth the trustee’s effort to collect and liquidate, it’s important to discuss with a lawyer whether Chapter 7 is in your best interest compared to what would happen to those assets in a Chapter 13 case.

  1. Taxes:

Closed-business bankruptcy cases often involve tax debts. While some taxes can be discharged in a Chapter 7 case, most cannot. Chapter 13 is often a better way to deal with taxes as it will depend on the type of tax and a series of other factors such as the time the tax became due and whether a tax return was filed.

  1. Other Non-dischargeable Debts:

Closed-business bankruptcies can result in more creditor challenges to the discharge of debts compared to other bankruptcy cases. These challenges are usually based on allegations of fraud against the business owner. Depending on the nature of the allegations, Chapter 13 may give you certain legal and tactical advantages over Chapter 7.

Conclusion:

Filing for Chapter 7 bankruptcy after closing down your business may seem like the best option, but it’s important to consider all factors before making a decision. The three factors discussed in this blog post – business assets, taxes, and other non-dischargeable debts – can play a significant role in determining what is best for you. It’s recommended to consult with a lawyer to help you make an informed decision.

If you are considering bankruptcy, it’s worth discussing your options; make a free phone appointment with Jennifer N. Weil, Esq. by clicking here.

Business Disputes and Bankruptcy: Avoiding Creditor Challenges

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Creditors can challenge the discharge of your debts in a bankruptcy case, especially when the bankruptcy is filed after a business shuts down. To avoid these challenges, it’s important to understand why they happen and what can be done to prevent them.

Reasons for Creditor Challenges:

  • Larger debt amounts, making litigation more tempting
  • Personal debtor-creditor relationships
  • Risky behavior by the business owner
  • Creditors may know about the debtor’s risky behavior

Often, former business owners considering bankruptcy feel that a creditor will challenge the discharge of their debts in court. But such challenges are relatively rare, for the following legal and practical reasons:

1. The legal grounds under which challenges to discharge can be raised are relatively narrow. Instead of proving the existence of a valid debt—as in a conventional lawsuit to collect on a debt—the creditor has to prove that the debtor engaged in behavior such as fraud in incurring the debt, embezzlement, larceny, fraud as a fiduciary, or intentional and malicious injury to property.

2. In bankruptcy, the debtor files under oath a set of extensive documents about his or her finances, and is also subject to questioning by the creditors about those documents and about anything else relevant to the discharge of the debts. When these documents, along with any questioning, reveal that the debtor genuinely has nothing worth chasing—as is most often the case—this tends to cool the anger of most creditors. Only the most motivated of creditors will be willing to throw the proverbial good money after bad in the hopes of getting nothing more than a questionably collectible judgment.

In conclusion, a dischargeability challenge can turn a simple bankruptcy case into a complex one. Hiring an experienced bankruptcy attorney can help you avoid challenges and defend against them if necessary. Contact an attorney if you have reason to believe that a creditor may challenge the discharge of your debts.

To discuss options – bankruptcy and non-bankruptcy – in resolving your debt, schedule a free telephone call with New Jersey bankruptcy attorney Jennifer N. Weil, Esq. at this Setmore page or by emailing weilattorney@gmail.com.

Protecting Yourself When Your Business Has to Shut Down

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Protecting yourself when your business has to shut down is important, since you may be personally liable for your business debts, even after you close your small business.

Protecting Yourself When Your Business Has to Shut Down

If you’re considering closing down your struggling business, you may be concerned about personal damage control: how do you end the business without being pulled down with it? If you are responsible for the debts of your former business, your creditors may sue you personally in an attempt to collect on those debts.

Often, business owners are confused as to whether they are personally responsible for business debts since those debts often do not appear on their personal credit report. But debt does not need to appear on a credit report for you to be personally responsible for it. Protecting yourself when your business has to shut down becomes a top priority when you are personally liable for the debts of your former business.

Sometimes a business owner, operating their business as a sole proprietorship, accumulates a lot of personally-guaranteed debt while trying to keep the business operating. Where the business owner has accumulated too much debt, they may need bankruptcy relief.

Let’s look at three options for bankruptcy relief in a situation like this: 1) A no-asset Chapter 7 case, 2) An asset Chapter 7 case, and 3) A Chapter 13 case.

No-Asset Chapter 7 for a Fast Fresh Start

After putting so much effort and hope into your business, once you accept the reality that you have to give up on it, you may want to clean it up as fast as possible. And in fact, a regular Chapter 7 bankruptcy may be the most consistent with both your gut feelings and with your legal realities.

IF everything that you own—both from the business and personally—fits within the allowed asset exemptions, then your case may be fairly simple and quick. A no-asset Chapter 7 case is usually completed from filing date to closing date in about three months. If none of your assets are within the trustee’s reach, then there is nothing to liquidate and distribute among your creditors, a process that can take a long time.

But this assumes that all your debts can be handled appropriately in a Chapter 7 case—the debts that you want to discharge (write off) would be discharged and those that would not are the ones that are not dischargeable under bankruptcy law. Non-dischargeable debts often include certain taxes, support payments, and perhaps student loans.

Asset Chapter 7 Case As a Convenient Liquidation Procedure

If you do have some assets that are not exempt, that alone may not be a reason to avoid Chapter 7. Assuming that those are assets that you can do without—and maybe even are happy to be rid of, if they came from your former business—letting the bankruptcy trustee take and sell them may be a sensible and fair way of putting the past behind you.

That may especially be true if you have some debts that you would not mind the trustee paying out of the proceeds of selling your non-exempt assets. You can’t predict with certainty how a trustee will act, but this is something to keep in mind.

Chapter 13 to Deal with the Leftover Consequences

Even if you’d prefer putting your closed business behind you quickly, there may be fallout from that business that a Chapter 7 would not deal with adequately. For example, if the business left you with substantial tax debts that cannot be discharged, non-exempt assets that you need to protect, or a significant mortgage arrearage, Chapter 13 could provide you with a better way of dealing with these kinds of creditors. Deciding between Chapter 7 and 13 when different factors point in different directions is where you truly benefit from having a highly experienced bankruptcy attorney help you make that delicate judgment call.

Schedule a telephone call to discuss your situation with NJ bankruptcy attorney Jennifer N. Weil, Esq. at (201) 676-0722, schedule your own consultation on my Setmore page, or email weilattorney@gmail.com.

2 Ways to Use Bankruptcy To Close Your Business

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2 ways to use bankruptcy to close your business involves leaving your business debt behind so that it does not come back to haunt you personally.

Closing down a business can be messy. Business bankruptcy is often more complicated than a regular bankruptcy case. But in one way, a business bankruptcy may be easier than a consumer bankruptcy case.

If you’ve owned a small business that you have shut down, or that you are about to shut down, you may be afraid of filing bankruptcy because you’ve heard that “business bankruptcies” are expensive and not a good way to wrap up the affairs of a business. However, bankruptcy can be a simple and effective solution.

The Means Test

The “means test” determines whether you may file a regular Chapter 7 case to discharge your debts in a few months, or whether you must file a 3-to-5-year Chapter 13 repayment case. Unless you need some of the other benefits of Chapter 13, many people prefer Chapter 7 because it gets them a fresh start more quickly and cheaply.

In some situations, a former business owner cannot pass the means test and will be required to go through Chapter 13. For example:

    • If, after closing her business, a business owner got a good job before filing bankruptcy, the income from that job may be higher than the “median income” applicable to her state and family size. So she may not pass the “means test.”
    • If the business was operated by one spouse while the other worked an outside job and earned a high income, the other spouse’s income may bump the couple above the “median income” with the result of not passing the “means test.”

But here’s the good news for some former business owners: the “means test” only applies if your “debts are primarily consumer debts.” (See Section 707(b)(1) of the Bankruptcy Code.) So if your debts are primarily business debts—more than 50%–you essentially can skip the “means test.”

Be careful here, because “debts” means all debts, including home mortgages and personal vehicle loans. So your business debts may have to be high to be more than all your consumer debts.

To apply this law, we must be clear about the difference between these two types of debts. What’s a “consumer debt”? The definition may sound familiar: it’s a “debt incurred by an individual primarily for a personal, family, or household purpose.” (Section 101(8).)  For example, if you took out a second mortgage on your home a few years ago to fund your business, the current balance on that second mortgage may not be a consumer debt.

Sometimes the line between consumer and non-consumer debt is not clear, so this is something you need to discuss thoroughly with your attorney if you want to avoid the “means test” under this “primarily business debts” exception.

If you have questions about qualifying for bankruptcy, call to schedule a free telephone appointment with Jennifer N. Weil, Esq. to discuss your situation at (201) 676-0722 or by emailing weilattorney@gmail.com.