Since everyone’s financial situation is unique, it’s best to consult a bankruptcy lawyer regarding your specific options. In general, however, small business owners may file for Chapter 11 bankruptcy for business entities or personal bankruptcies. Whether you should file for personal or a business entity depends largely on the amount of debt you owe. Chapter 11 bankruptcy enables you to restructure your debt, which will allow you to continue to operate your small business while you pay back your creditors under a court-approved plan.
If you are a sole proprietor, a better option may be to file for Chapter 13 bankruptcy. This enables you to eliminate your personal liability for your small business’ debts. Small business owners who run a corporation, limited liability company, or partnership may be eligible to file for Chapter 7 bankruptcy. This option may be ideal for you if you wish to shut down your business entirely, liquidate its assets, and discharge the debt.