Running a small business in Maryland can be a rewarding but challenging endeavor—especially when financial hardships arise. Whether it’s due to market shifts, rising debt, or unexpected disruptions, sometimes bankruptcy becomes the most practical step to reset and rebuild. If you’re a small business owner in Baltimore or the surrounding areas, it’s important to understand how the bankruptcy process works and how it impacts both your business and personal finances.
At The Law Offices of Nicholas J. Del Pizzo, a bankruptcy law firm in Baltimore, MD, we understand that filing for bankruptcy is not a one-size-fits-all decision. We offer personalized legal counsel tailored to your unique situation, and this guide will help you explore your options for filing bankruptcy in Maryland in 2026.
Guide to Filing Bankruptcy in Maryland as a Small Business Owner in 2026
Understanding Small Business Bankruptcy
What Does It Mean for Small Business Owners?
Filing for bankruptcy as a small business owner involves assessing whether your business can be saved or if it’s time to close its doors and discharge the debt. Depending on your business structure—sole proprietorship, partnership, or corporation—your legal responsibilities and exposure to debt may vary.
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Sole Proprietors are personally liable for business debts, so filing bankruptcy typically includes both business and personal obligations.
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Partnerships may involve multiple parties liable for debt, which can complicate filings.
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Corporations and LLCs are separate legal entities, which can limit the owner’s personal liability depending on circumstances.
Types of Bankruptcy Available to Small Business Owners
Chapter 7 Bankruptcy (Liquidation)
Chapter 7 is often suitable for business owners ready to shut down and liquidate assets. For sole proprietors, it also discharges personal liability for qualifying debts. In this case, a court-appointed trustee sells non-exempt assets to pay creditors.
Best for: Businesses that have ceased operations or have unmanageable debt and few remaining assets.
Chapter 13 Bankruptcy (Reorganization for Sole Proprietors)
Chapter 13 is only available to individuals, not business entities. However, it can be a great option for sole proprietors with steady income who want to reorganize debt while keeping the business running. It allows you to create a 3- to 5-year repayment plan, potentially reducing the total debt owed.
Best for: Sole proprietors with predictable income and a desire to continue operations.
Chapter 11 Bankruptcy (Business Reorganization)
Chapter 11 is designed for businesses that want to continue operations while restructuring their debt. It’s complex and expensive but can be effective for businesses with significant revenue that just need breathing room to recover.
Best for: Corporations, LLCs, or partnerships with substantial debt and long-term growth potential.
Step-by-Step Guide to Filing Bankruptcy as a Maryland Business Owner
1. Evaluate Your Financial Situation
Before filing, assess your assets, liabilities, cash flow, and the long-term viability of your business. An experienced bankruptcy attorney like Nick Del Pizzo can help you determine whether bankruptcy is the best solution—or if alternatives like debt negotiation or business restructuring may be more appropriate.
2. Choose the Right Bankruptcy Chapter
Choosing between Chapter 7, Chapter 13, or Chapter 11 depends on:
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Your business structure
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Whether you want to keep operating
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Your ability to repay some debts
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The nature of your debts and assets
A legal consultation is critical at this stage to avoid mistakes that could cost you your business—or your personal assets.
3. Gather All Required Documentation
To file, you’ll need detailed records of your financial situation:
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Business and personal tax returns
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Profit and loss statements
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Balance sheets
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Business assets and liabilities
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List of creditors and amounts owed
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Leases, contracts, and payroll data
The more organized your documents are, the smoother the process will be.
4. Complete Required Courses
Just like individuals, business owners (especially sole proprietors) must complete credit counseling from an approved provider before filing. A second debtor education course is required before debts are discharged.
5. File the Bankruptcy Petition
Your attorney will help you file the bankruptcy petition in the U.S. Bankruptcy Court for the District of Maryland. This includes schedules of assets, liabilities, income, and expenses, along with business-related forms depending on your chapter type.
Once filed, the automatic stay goes into effect, immediately halting most collection actions from creditors.
6. Attend the Meeting of Creditors (341 Meeting)
About 20–40 days after filing, you’ll attend a meeting with the bankruptcy trustee, where you’ll be asked to confirm your financial details under oath. Creditors can also attend, though they rarely do. The trustee may ask questions about your business’s operations, debts, and asset transfers.
7. Proceed With Liquidation or Plan Approval
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Chapter 7: Trustee liquidates non-exempt assets.
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Chapter 13: A repayment plan is reviewed and confirmed by the court.
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Chapter 11: A reorganization plan is submitted for approval and voted on by creditors.
8. Receive Your Discharge
Once all requirements are met and timelines are followed, you’ll receive a discharge order from the court, eliminating qualifying debts and allowing you to move forward.
Contact The Law Offices of Nicholas J. Del Pizzo for Assistance With Bankruptcy
At The Law Offices of Nicholas J. Del Pizzo, we understand that small business owners face unique legal and financial pressures. That’s why we offer:
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Personalized legal advice from Nick Del Pizzo himself—no paralegals or junior associates
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Flexible availability, including evenings and weekends
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Experience in business and personal bankruptcy, foreclosure defense, and financial recovery
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Local knowledge of Maryland law and the Baltimore business climate
When you work with our firm, your case becomes our cause. We’ll help you navigate the complexities of business bankruptcy while protecting your rights and your future.
Bankruptcy isn’t The End Its a New Beginning
Filing for bankruptcy as a small business owner in Maryland is a serious decision, but it can also be a powerful tool for reclaiming your financial future. Whether you need to close a chapter or reorganize and push forward, bankruptcy offers legal protections that can help you reset and rebuild.
If you’re a Maryland small business owner considering bankruptcy in 2026, contact The Law Offices of Nicholas J. Del Pizzo today for a confidential consultation. We’ll walk you through your options and create a strategy tailored to your unique situation.
