The bankruptcy option that's right for you

Quiz

Do you have a stellar business plan?

Take this quiz to find out if your plan could wow our judges.

1. Does your management team include experts in each area of the business, including an industry specialist, a financial planner, and a marketing whiz? And is your board of directors balanced?

a. Yes
b. Halfway there
c. No

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Current Issue

(FORTUNE Small Business) -- Dear FSB: I started my landscaping business 16 years ago and funded it with available cash and credit cards. My husband quit his job to work with me because finding help was always a problem. Ten years later, we expanded our business and began buying and flipping houses and rentals.

Here in Florida, the market has crashed terribly. Even in the rental market I find myself 30 days behind on all the rentals. All the units are for sale - I'm hoping to short-sell all of them. That will still leave me with $118,000 to repay. If I filed for Chapter 13 would it help? I made my debts, I feel I should pay them. Is this a stupid idea? We hoped this would be our retirement, but it looks like we won't have any.

- Lisa Fudge, Affordable Landscaping

Dear Lisa: Bankruptcy may be tempting, but it's not the only option.

"It acts like a stain on your finances. Everything you relate about you and your situation tells me you can work through this temporary set of financial troubles," says Terry J. Siman, an attorney and cerified financial planner, and the president of Blue Bell, Pa.-based Vantage Point Advisors.

Chapter 13 is generally a reorganization of debts, not a complete forgiveness of debt like Chapter 7, according to Sean Monohan, a certified financial planner with Certified Financial Strategies of Dallas, Texas. Chapter 13 would leave you with a combination of debt forgiveness, restructured payment plans and probably some selling of properties and other assets.

"While this may seem like a comparatively quick solution, there are some consequences that most people don't factor into this type of plan," Monohan says.

First, you would lose control of your situation: the bankruptcy process would determine what assets are sold and how they are valued. Second, you'll incur attorney's fees. Finally, forgiveness of debt, even though a bankruptcy process, is generally viewed by the IRS as income, and you'll be taxed accordingly.

Siman and Monohan suggest reevaluating your situation. Start with your real estate.

"Tell your tenants they can't live in your properties without paying rent. If that means they must leave, so be it," Siman says.

Consider lowering your rent if that's what it takes to keep the properties occupied, suggests Monohan, who also recommends consulting with a real-estate professional who specializes in property management to help you analyze how to most efficiently market, maintain and rent your properties. Renting them as seasonal properties might be an option.

Talk to your lenders about refinancing. "They surely don't want to own these properties via foreclosure," says Siman. "They might offer reduced terms or interest-only options."

Also, look to your first business for stability.

"This might be the time to aggressively pursue new landscaping business, which could increase cash flow and alleviate the burden of carrying the properties out of the bottom of the market," Siman says.

If landscaping opportunities seem bleak, get rid of that business like you would bright yellow dandelions in a pristine green yard.

"Assess your employment opportunities immediately," says Siman, who urges you to talk to a professional financial planner to help you craft a new retirement strategy - a retirement which, he adds, you can still have.

"It just might be a different retirement than you envisioned a few years ago," he says.