A frequently asked question indeed, particularly for self-employed people who are incorporated (i.e. as an LLC or S Corp, etc.) and the business is failing. (If you have a very large operation and want to shed corporate debt, and keep the business going, a chapter 11 is sometimes a solution, and I do not handle chapter 11, as it can be very expensive and complicated, and only reserved for relatively large businesses).
The first thing I will need to understand, is who is liable on the debts – if you have personal debt, even if they were used for the business, and/or if you personally guaranteed any of the business debt (most typically the lease, or business credit card or lines of credit) then a business bankruptcy does not discharge your personal liability – that’s why they had you sign the personal guarantee in the first place. A lot of people who contact me thinking they need a business bankruptcy, really just need a personal bankruptcy.
One important distinction to make, is that individuals get a discharge of their debts, in return for liquidation of nonexempt assets, and in most cases, there are no assets to liquidate. But all a corporation gets in a chapter 7 bankruptcy, is the liquidation of assets. Corporations do not get a discharge.
A self-employed person who has corporate debt, and wants to continue in the business, may have an option to reincorporate under a new name.