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West Palm Beach Bankruptcy & Business Attorneys > > Chapter 11 Bankruptcy > How Reorganization Bankruptcy Affects Your Credit

How Reorganization Bankruptcy Affects Your Credit


If you’re a business owner, you wear several hats. From managing the business to making payroll to paying your business taxes, these tasks can be financially straining. If you decide to file a reorganization bankruptcy, you may wonder how this affects your credit or whether it has an effect on your credit at all. Today, the attorneys of Kelley Kaplan & Eller will describe how reorganization bankruptcy affects your credit.

Chapter 11 Bankruptcy Affects Credit Depending on the Business Structure

Reorganization bankruptcy, also known as Chapter 11 bankruptcy affects a business owner’s credit depending on the business formation structure.

  • Sole Proprietorship. If your West Palm Beach business is a sole proprietorship, you are responsible for any debts because you are the business. The business is not a separate and stand-alone entity.

This means a business bankruptcy would essentially be a personal bankruptcy such as a Chapter 7. As such, the bankruptcy would have a negative effect on your credit for between 7 to 10 years.

  • LLC or Corporation. Limited Liability Companies and Corporations provide a shield of protection from liability. These types of business structures can file for Chapter 11 business bankruptcy.

In many cases, your credit will not be affected as you are not responsible for the debts the business incurred when operating under an LLC or Corporation. Your business will have its own credit.

It is important to review any agreements the business made with creditors because if your business obtained any kind of business credit, you may have agreed to be partially responsible for debt, known as a personal guarantee.

When the business files bankruptcy and pays the debt, your credit will remain unaffected. Unfortunately, if the debt is not paid, you will have some level of responsibility. In this case, the unpaid portion of debts may appear on your credit report, resulting in damage to your credit score.

What about taxes?

If your business owes taxes, you can be held legally responsible for them. A tax lien can severely damage a credit score that a business owner worked so hard to keep up.

No matter what kind of shape your credit is in and what kind of business formation you have, a business bankruptcy or personal bankruptcy should never be pursued without the expertise of a West Palm Beach bankruptcy attorney. An attorney with many years of experience can help you protect and preserve your personal credit while filing for bankruptcy.

When You Need Help Filing Chapter 11 Bankruptcy for Your Business, Contact Our West Palm Beach Chapter 11 Bankruptcy Attorneys

If you’re looking to file bankruptcy for your business, or personal bankruptcy for yourself contact Kelley Kaplan & Eller at 561-264-6850 for a bankruptcy plan consultation. Our West Palm Beach Chapter 11 bankruptcy attorneys will thoroughly examine your circumstances and issues to discover the best plan of action for you and your business. We will be right by your side when you want to either save your business, close your business, or work to preserve and protect your personal credit.


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