Small business bankruptcy occurs. Sometimes small business firms don't make it. They fail financially for various reasons and find themselves faced with deciding if bankruptcy is necessary.
Chapter 7 bankruptcy may be the best option when the business has no future. It is usually referred to as liquidation. It is usually use when the debts of the business are so overwhelming that restructuring them is not feasible.
Chapter 7 bankruptcy usually means that the business is over.
In Chapter 7 bankruptcy, a regent is appointed by the bankruptcy tribunal to take possession of the assets of the business and distribute them among the creditors. After the assets are distributed and the regent is paid, a sole proprietor receives a "discharge" at the end of the case.
A discharge means that the owner of the business is released from any obligation for the debts. Partnerships and corporations do not receive a discharge.
Chapter 11 is a better option for busi...