Business Dissolution to Avoid Bankruptcy
A personal bankruptcy is not always the answer to a business debt problem. Particularly in the case of high-income earners, a bankruptcy sometimes creates more problems than it solves. If you have a lot of debt related to a business, you might be able to deal with it through a dissolution rather than a bankruptcy.
Some people just allow broke companies to go defunct. You can, however, go through a formal dissolution process, called “winding up.” This involves filing some paperwork with the State of Colorado, and then adopting a wind up plan. The plan lists off the company’s assets and debts, and proposes how to distribute those assets according to a certain set of rules and priorities. There are things that can be done in the dissolution process to deal with your business debts (even those the owner may have personally guaranteed) and, hopefully, avoid the need for a personal bankruptcy.
Be aware, however, that this kind of procedure requires an experienced attorney to draft the documents and explain the procedure. A successful dissolution has a lot to do with the specifics of the plan and the correspondence to creditors, and I would not recommend anyone doing this on their own.
This post does not constitute legal advice. If you need legal advice, please make an appointment with our office.