California small business owners have it tougher than most small business owners in the country. According to the Los Angeles Times, California small business bankruptcies grew by 81% over the past fiscal year, compared to the previous fiscal year. These percentages were provided by the credit agency Equifax, Inc.
While these numbers may seem depressing, experts warn that numbers may be even higher because most small business owners start their businesses as sole proprietorships and file for personal bankruptcy versus commercial bankruptcy. Lawyers often advise small business owners to file for personal bankruptcy instead of business bankruptcy because the filing process is easier. Ms. Kathleen March, a bankruptcy lawyer in Los Angeles said that many small business owners go out of business only to discover that their company's debts continue to haunt them.
Ms. March told the Los Angeles Times: "The norm is if you're running a small business, you will have to either cosign or personally guarantee the significant debts. The business itself can shut down, but the people cosigned all the debts. So, the individuals are then saddled with these huge debts."