Small Business Bankruptcy

Definition - What does Small Business Bankruptcy mean?

Small business bankruptcy is when a small business can no longer meet its financial obligations and it files for bankruptcy. Small businesses have a number of different options for filing bankruptcy. Small businesses can file for Chapter 7, Chapter 11 or Chapter 13 bankruptcy. Each of these choices provides different options for dealing with a small business's bankruptcy issues. In the context of the law, small businesses that file for bankruptcy must follow certain legal protocols while going through the process.

Justipedia explains Small Business Bankruptcy

Bankruptcy can occur to small businesses just as it can occur to large businesses or to individuals. Small businesses may have smaller financial obligations or debts than large businesses, but they also tend to have smaller incomes. So, if something goes wrong—such as a sudden decrease in sales—small businesses can quickly become insolvent. When a small business files for bankruptcy, its assets can be evaluated and used to repay debts that it owes. Depending on whether a business would like to try to remain operational following the bankruptcy proceeding, there are a number of different paths it can take through the process.

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