Will My Small Business Bankruptcy Affect Personal Assets?
When a business is considering bankruptcy, the business owner or owners often want to find out more about how the business bankruptcy will affect their personal assets. Indeed, many business owners are concerned that they will be personally liable for business debts, or that a business bankruptcy will have an impact on their personal credit score or finances. There is no straightforward answer because the answer will depend on the type of bankruptcy the business is filing, the structure of the business, and the specific types of credit or loans that the business has.
Our West Palm Beach bankruptcy attorneys can explain in more detail below, and we can discuss your particular business and personal financial circumstances today if you still have questions or need assistance with your bankruptcy filing in South Florida.
What is Your Business Structure?
First, how is your business structured? In general, if your business is structured so that it is an entity separate and distinct from you personally, you are unlikely to have your personal assets impacted by a business bankruptcy filing.
More precisely, is your business structured as a sole proprietorship or something else? Sole proprietorships and their owners are not distinct entities. Accordingly, when a sole proprietorship files for bankruptcy, the individual business owner is also filing for bankruptcy (and vice versa). However, with partnerships, limited liability companies (LLCs), and corporations, the business entity is distinct from the owner or owners, which means the owner’s personal finances should not be impacted unless there is an exception.
Have You Made Any Personal Guarantees for Business Loans or Credit?
When a partnership, LLC, or corporation files for bankruptcy, individual business owners should only be concerned about their personal assets being affected if they made a personal guarantee for a business loan or business credit. Yet depending on the type of bankruptcy, it may not ultimately become an issue.
If your business is planning on a Chapter 11 filing, a Subchapter V filing, or another type of reorganization bankruptcy filing, your business can plan to repay the full amount of the debt for the business loan and to get caught up with the creditor without the owner who made the personal guarantee becoming personally impacted. The individual business owner who made a personal guarantee to secure a line of credit or a loan is only likely to end up being personally liable for that full amount if the business files for liquidation bankruptcy under Chapter 7.
Contact a West Palm Beach Bankruptcy Attorney for Assistance
Is your business considering a bankruptcy filing, but you and other business owners have concerns about the potential impact to your personal finances? To find out more about the potential impact of a business bankruptcy on your personal finances, or to obtain assistance with your business bankruptcy case, you should get in touch with one of the experienced West Palm Beach bankruptcy lawyers at Kelley, Fulton, Kaplan & Eller. We can speak with you today about your business bankruptcy plans, can answer any questions you have about business bankruptcy, and can begin working with you on your filing. Contact our firm for assistance.
Source:
law.cornell.edu/uscode/text/11
