Can a sole proprietor file chapter 7 bankruptcy?

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Question:

I have my own public relations business. It’s a sole proprietorship, with me as owner and only full-time employee. I started it about 18 months ago, and I haven’t been able to build up my business fast enough, so I’m running in the red. I have a number of debts relating to the business, such as for marketing and advertising, web design and hosting, and rent on office space. I don’t think that there’s really any future for the business, so I was wondering if a Chapter 7 bankruptcy is an option for me?

 

Answer:

Chapter 7, or liquidation-style, bankruptcy, is probably the most widely-available type of bankruptcy. Essentially, anyone can take advantage of it. As the United States court system itself notes, “To qualify for relief under chapter 7 of the Bankruptcy Code, the debtor may be an individual, a partnership, or a corporation or other business entity.” As a sole proprietorship, your business would qualify as both an “individual” (since a sole proprietorship is the individual proprietor; there is no effective distinction between individual owner and business) and “other business entity.”

You can find the eligibility requirements for a Chapter 7 bankruptcy at 11 U.S.C. Sections 101 (41) and 109(b).

Therefore, if Chapter 7 is the right choice for you and your business, it is something you may do. It would be a good idea, however, to meet with and seek the advice of a bankruptcy attorney, who can guide you as to whether this, or possibly one of the bankruptcy forms, is truly the best option.

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