Protecting Your Personal Assets in a Business Bankruptcy

Is your business struggling and considering filing for bankruptcy? If so, you may be concerned about how a business bankruptcy can impact your personal finances, and what options may be available to you and other owners of your business to protect your personal assets. There is no single answer to this line of questions since the answers will depend on the structure of your business and the particular type of bankruptcy being filed. Our West Palm Beach bankruptcy attorneys can discuss the specific details of your case with you today, and in the meantime, the following are some important considerations related to personal assets and business bankruptcy in South Florida.

Business Finances and Personal Finances Are Separate, But There Are Exceptions 

Generally speaking, business finances and personal finances are separate, which means a business bankruptcy should not, in theory, affect a business owner’s personal finances. Accordingly, for most kinds of business bankruptcy, owners (or members, or partners, depending on the type of business structure) will not need to make plans to protect their personal assets. However, there are exceptions that you should know about.

Is Your Business Bankruptcy Associated with a Sole Proprietorship?

 The primary exception to business and personal finances not affecting one another in a business bankruptcy case is when the business is structured as a sole proprietorship. Sole proprietorships are not separate entities (as other business structures such as partnerships, limited liability companies (LLCs) and corporations are). As such, when a sole proprietorship files for bankruptcy, the individual owner (the sole proprietor) is also filing for personal bankruptcy. The bankruptcy case is, in effect, a personal bankruptcy filing that includes the assets and liabilities of the business.

In a Chapter 13 bankruptcy (which sole proprietors can file since the business is an individual filing), there is no need to take significant steps to protect personal assets since assets are not liquidated in this type of bankruptcy. If you plan to file for a Chapter 7 bankruptcy, you will want to discuss all relevant exemptions under Florida law with your bankruptcy attorney to protect as many assets as possible.

Did You Make Personal Guarantees on Business Loans?

 Another exception to consider for businesses structured as partnerships, LLCs, and corporations is whether you (or other business owners) made any personal guarantees on business loans, such as an EIDL loan. If so, your personal assets likely will not be at risk in a Chapter 11 or other type of reorganization bankruptcy filing, but a business liquidation could result in your personal liability for the loan amount. You will want to discuss options for protecting your personal assets with a bankruptcy attorney.

Contact a West Palm Beach Bankruptcy Attorney for Assistance 

Is your business considering bankruptcy? Whether you own a sole proprietorship and need assistance with a bankruptcy filing that will be a personal case, or your business needs assistance with a reorganization bankruptcy filing, our firm is here to assist you. We have years of experience representing individuals and businesses in South Florida bankruptcy cases, and we can begin working with you today on your case. Do not hesitate to get in touch with one of the experienced West Palm Beach bankruptcy lawyers at Kelley, Fulton, Kaplan & Eller. Contact us today to learn more about how we can assist you.

Sources:

law.cornell.edu/uscode/text/11

leg.state.fl.us/STATUTES/index.cfm?App_mode=Display_Statute&URL=0200-0299/0222/0222ContentsIndex.html