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The Small Business Break-Up
Approximately 25% of Chapter 7's are the result of these.
Ralph and Irene opened their own small business in 1989. When the business began, Irene worked full-time at the store while Ralph retained his position as an insurance salesman. Initially, the business was so profitable that after only one year of operation, Ralph was able to quit his job to work alongside Irene.
Unfortunately, business conditions change, the video market became flooded with competition in 1987, and they were quickly squeezed out of business by major chains with bigger selections and cheaper prices.
In the process of their demise, their rent payments fell in arrears and the landlord began threatening to padlock their business and inventory. In addition, they owed money to several of their suppliers, and since they were now both working there full-time, they were no longer able to meet their household expenses, credit card payments, mortgage, car loans, etc. Eventually, they closed their business and filed a Chapter 7. By doing so, they eliminated all their past due rent payments and were also able to break their lease with their landlord. If they had not filed, the landlord could have held them for all of the future monthly rental payments that became due, until the landlord was able to relet the premises to another tenant. Also, if the landlord had found another tenant who was going to pay less money per month, Ralph and Irene would have been responsible for the difference between what the new tenant was paying and what they were obligated to pay. In addition, they were also able to eliminate other business obligations, the payments associated with the business plus all the monies due on their personal charge cards and loans. After relieving themselves of the stress of such a predicament, they were both able to find well paying jobs, retain their home and their other major possessions.
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