When it comes to owning a business, many times owners put their own personal finances on the line thinking that the investment now will be worth it financially in the end. However, sometimes the business ends up not doing as well as one had hoped, and that same owner finds filing for a personal bankruptcy may be the only option in terms of getting out of mounting debt.
One example of this is the co-owner of Windowwizards, which is a window installer that recently had to close its doors. And while the company is not claiming to be officially shut down for good, the co-owner has still found himself owing more to creditors than what he had in assets, and recently decided to file for Chapter 7 bankruptcy protection.
According to the filing, which was obtained from the U.S. Bankruptcy Court in the southern district of Florida, the co-owner owes $5.8 million to creditors, but has only $1.1 million in assets.
The filing claims that a majority of that money that is owed to the creditors stems from Windowwizards which is also under a lot of heat right now as many customers claim to have put down money on windows, yet haven't received them yet. Specifically, the co-owner claims that included in his personal debts are $3 million to Windowizards, and another $374,000 to American Express for an account that was used for Windowwizards.
Typically in a Chapter 7 bankruptcy filing, a person's assets are sold off to pay off their creditors; however, in this situation the co-owner is claiming that his $1.1 million in assets should be exempt, which includes a $1 million Delray Beach home, along with a country club bond and a golf cart.
At this point a judge has not made any decisions related to the Chapter 7 bankruptcy filing.
A Chapter 7 bankruptcy is just one type of filing that is available to individuals, and is quite often suggested as the best option for those who have a lot of business debt. Another option would be a Chapter 13 filing, under this - instead of debt being discharged - it is actually paid back through a court-approved repayment plan.
Source: MyFoxPhilly.com, "Windowwizards Co-Owner Files Bankruptcy," 28 Feb 2011