What to Consider in Filing for Bankruptcy as a Sole Proprietor
Filing for bankruptcy as a sole proprietor in Oklahoma is never an easy decision. As a sole proprietor, your main source of income may well be the business that is now facing the possibility of bankruptcy. You have your professional reputation and your clients to consider in addition to your creditors.
If you and your family depend on your income, you must all make accommodations in the process. It is always best to consult with a Muskogee bankruptcy attorney to determine if bankruptcy is right for you and what the process will entail.
Federal bankruptcy laws are primarily governed by the United States Bankruptcy Code, which is a federal law enacted by Congress. The Bankruptcy Code establishes the framework for bankruptcy proceedings, including the types of bankruptcy available, eligibility requirements, procedures, and the rights and obligations of debtors and creditors.
What Type of Bankruptcy Filing is Right for You?
As a sole proprietor, you can typically choose between filing for Chapter 7 bankruptcy or Chapter 13 bankruptcy. Chapter 7 bankruptcy involves liquidating your assets to pay off debts, with certain exemptions allowed by Oklahoma law. Any remaining eligible debts may be discharged, providing you with a fresh start. It is important to know that while Oklahoma law covers some parts of the bankruptcy, bankruptcy is a federal court proceeding.
While federal law governs bankruptcy proceedings, state law can play a role in various aspects of bankruptcy, including exemptions, property rights, and certain procedural matters. In Oklahoma, bankruptcy filers may utilize either federal bankruptcy exemptions or state-specific exemptions to protect certain types of property from liquidation during bankruptcy proceedings. Oklahoma law outlines the types and amounts of property that are exempt from bankruptcy proceedings, allowing debtors to retain essential assets.
Chapter 13 bankruptcy involves creating a repayment plan to pay off debts over a period of three to five years. This option allows you to keep your assets while restructuring your debts. This also allows you to keep your business going through the bankruptcy and into the future.
Before filing for bankruptcy, you must complete a credit counseling course from a court-approved provider. This course helps you understand your financial situation and explore alternatives to bankruptcy. This in conjunction with consultation with a Muskogee bankruptcy attorney can help you determine the right course of action for you and for your business.
Next Steps in Bankruptcy
It is important to collect all of your relevant financial documents, including tax returns, bank statements, income records, debt statements, and any other documents related to your business and personal finances. Your attorney will want to get a clear sense of what is involved in your business and in your personal finances before your file for bankruptcy.
Bankruptcy forms include the petition for bankruptcy and accompanying forms and schedules. You and your attorney can fill out the necessary forms, which include schedules detailing your assets, liabilities, income, expenses, contracts, leases, and other financial information. You’ll also need to provide a statement of financial affairs to the bankruptcy court.
Once your forms are complete, you or your attorney can file them with the bankruptcy court in Oklahoma. You’ll need to pay a filing fee unless you qualify for a fee waiver or installment payment plan. Upon filing for bankruptcy, an automatic stay goes into effect, which halts most collection actions, including creditor harassment, lawsuits, wage garnishments, and foreclosure proceedings.
The Meeting of the Creditors
You’ll be required to attend a meeting of creditors, also known as a 341 meeting, where you’ll answer questions about your finances under oath. Creditors may attend to ask questions, but it’s rare for them to do so in Chapter 7 cases. They are more likely to ask questions if your petition is for repayment.
In a Chapter 7 bankruptcy, a trustee may sell nonexempt assets to repay creditors. Afterward, eligible debts are discharged, providing you with relief from those obligations. If you are filing for bankruptcy as a sole proprietor, the trustee appointed to oversee your bankruptcy case may sell your personal assets as part of the liquidation process in Chapter 7 bankruptcy. In Chapter 7 bankruptcy, the trustee’s primary responsibility is to liquidate non-exempt assets and distribute the proceeds to your creditors.
As a sole proprietor, your personal assets and business assets may be considered part of the bankruptcy estate. Personal assets that are not exempt under federal or state law may be subject to sale by the trustee to generate funds for creditors. This can include assets such as real estate, vehicles, investments, bank accounts, and valuable personal property.
However, it’s important to note that certain personal assets may be exempt from liquidation under federal or state bankruptcy exemptions. Exemptions allow you to protect certain types and amounts of property from being sold by the trustee to satisfy creditor claims. In Oklahoma, bankruptcy filers have the option to choose between federal bankruptcy exemptions or state-specific exemptions, which may protect assets such as a homestead, vehicle, household goods, and tools of the trade.
Moving Through Either Liquidation or Repayment
Once assets are liquidated in a chapter 7 bankruptcy and creditors are paid, the remainder of your debts are discharged and you no longer owe your creditors anything.
If you file for Chapter 13 bankruptcy, the court will review and approve your proposed repayment plan. Once approved, you’ll make regular payments to a trustee, who will distribute them to your creditors. At the end of your repayment plan period, your debts are discharged and you can continue your business.
Beyond Bankruptcy
After bankruptcy, focus on managing your finances responsibly and rebuilding your credit. Establish a budget, avoid taking on new debt unnecessarily, and consider seeking financial counseling or education to help you achieve long-term financial stability.
It’s essential to consult with a knowledgeable bankruptcy attorney in Oklahoma to understand your options, navigate the bankruptcy process effectively, and make informed decisions based on your specific circumstances.
Low-cost Strategy Session With a Muskogee Bankruptcy Attorney
Get the help you need when you need it most. Contact the Muskogee lawyers at the Wirth Law Office – Muskogee for a initial consultation today at (918) 913-0725. If you prefer to contact us by email, use the form at the top of this page.
