When you first start out in a small business, you may be filled with hopes and aspirations, big ideas, and a great sense of money management.

However, it is all too common in a struggling economy for small businesses to get pushed under the rug in favor of other large companies that can combat trying times with attractive pricing.

In the event you are forced to file bankruptcy because of a business that has lost too much in sales and is draining your money, there is no doubt you have a lot of concerns. Here are a few of the most common.

Why should you file corporate bankruptcy as opposed to personal bankruptcy?

While the financial lines can be blurred between what is your personal debt and what is the debt of your small-scale corporation, it is important that you know the difference between personal and corporate bankruptcy. When you file for business bankruptcy, there will be options that would not be available otherwise, such as the cancellation of contracts. Furthermore, a personal bankruptcy can be more derogatory on a credit report than a business filing. 

When you file bankruptcy, will it mean that you are automatically going to lose your business?

This depends on the type of bankruptcy filed. Chapter 7 bankruptcy is usually a dissolution of debt that leads to selling off all assets, including the business itself in some cases. On the other hand, chapter 11 is designed to liquidate certain assets to eventually give the business more financial stability.

How will bankruptcy work if the small business is a joint venture?

If the small business you own is not all your own, you and any other associated party will have to agree on the bankruptcy filing and be involved in the process. If one party wants to make an investment to save the business and take sole ownership, there is often the opportunity to do so. However, most joint owners will file together because both are tied up financially in the overbearing debt of the business.

In any setting, the idea of having to file bankruptcy can seem like a sentence to financial demise. However, if you heed the advice of a law firm, such as Yerger & Tyler, Attorneys At Law, and keep the focus of your business in mind, filing could actually be more of a saving grace for your business than a threat to its vitality.