A limited liability company or LLC is a relatively new type of business that was created by the state. Because LLC’s haven’t been around very long, how to file for bankruptcy in an LLC is an ever-evolving process. It may different in each state because the different jurisdictions are still trying to determine how to handle the process as well. Typically, bankruptcy courts have to decide whether to handle a multi-owner LLC as a partnership or as a corporation. The reason that this is complicated is because an LLC is technically a hybrid of both of these business models. The bankruptcy of a sole member of an LLC can cause the bankruptcy to dissolve and distribute assets to creditors.

To file bankruptcy as an LLC, you will first need to determine if your company is eligible. You should visit the United States Courts website for information about bankruptcy or talk to a bankruptcy lawyer to discuss your situation. A knowledgeable attorney from your area will probably be able to tell you whether or not you qualify for bankruptcy protection depending on the accumulation of your debts. If you believe that you will qualify, then file a petition with the United States bankruptcy court. The court normally looks to the state to determine eligibility.

If you are not approved for bankruptcy, then you will need to explore other options that are available to you. LLC’s can often receive a debt settlement or can create a repayment plan that will satisfy creditors. You may also be able to get your debt reduced in court. You may want to meet with a financial consultant who can advise you on how to manage business better and will suggest strategies for improving your credit score. You may need reorganize your business and cut workers or paychecks in order to scrape and save to repay outstanding debts.

If you truly believe that bankruptcy is the way to do and believe that you will be able to qualify in your state, then you need to determine what kind of bankruptcies you can file for. A Chapter 7 bankruptcy is a liquidation of assets and the court will sell all of your entities in order to pay back your creditors. A Chapter 13 bankruptcy is a repayment plan where you set aside the bulk of your income in order to satisfy debts with large monthly payments. There are other options that are available to some business owners. Your case will probably differ depending on the number of owners that are involved.

You may want to consider dissolving the LLC if it is becoming a hindrance to your bankruptcy. Under most local state laws, you can dissolve your LLC unless you are prevented by a statement in your operating agreement. By taking the three letters off the end of your company name, you may be able to make things much easier for your bankruptcy. You should plan for a pretty long process when it comes to an LLC bankruptcy. The fact is that an attorney will need to work closely with your to file a petition and then complete the filing.

You will need to fill out pages of paperwork that are called schedules which will list your assets and liabilities and will need to comply with the bankruptcy court mandates. While the process may seem long and difficult, there are times that it is an excellent alternative to having creditors sue your company. Contact a bankruptcy attorney today if you are an LLC that is looking for representation and wants to file.