The line between a personal bankruptcy and a business bankruptcy can get blurred easily. Many people who own their own business may find a time in which filing for bankruptcy on their personal accounts is necessary, but don’t want to affect their business. We can help!
The Lee Law Firm specializes in bankruptcy and can help anyone find financial relief whether they are filing personally or on a business level. In either case, our knowledgeable attorneys know how to help you get the most out of your bankruptcy and protect your assets, business and livelihood.
Filing Personally and Protecting Your Business
There are a few things to consider about a bankruptcy filing when the protection of a business is at stake.
1. Full Disclosure. One of the most important aspects of filing for bankruptcy separate from a business is not to leave out the information about your business. You are required to disclose the information about your business when you file for personal bankruptcy. Many people make the mistake of forgetting to include or withholding this information, which can complicate the process and may result in a dismissal of your case.
Why? Because your business is considered an asset. Depending on the type of personal bankruptcy you file, some assets may be at risk of liquidation in order to satisfy the debts owed to creditors.
Don’t worry! Including the information about your business not necessarily put it at risk or mean that you will lose your business. The information is included to give the bankruptcy court an idea of what your financial situation is like. Further, the bankruptcy court will look for other assets that can satisfy your debts because they are not in the business to take away your source of income or financial means.
2. Debts and Creditors. One issue of concern when proceeding with a personal bankruptcy case separate from your business is the nature of your debts and creditors. Some creditors can be very aggressive and may try to seize business assets in order to satisfy the debt. However, there are some rules that govern this practice and most creditors do not maintain the right to do this.
If the business is legally operating under a protected liability status, creditors may not seize any business assets in effort to claim payment for a personal bankruptcy. A Limited Liability Corporation is one example of a small business whose assets are legally protected from liquidation for the purposes of a personal bankruptcy debt collection.
However, a common mistake made by some business owners is blending business and personal funds. When this happens, the personal bankruptcy case can become complicated. For example, if you personally co-sign for a loan on a business account, your business finances may become accessible during a personal bankruptcy. Another example is business expenses such as a company car. If you use a company car as also your personal vehicle, creditors may be able to take that car during the bankruptcy process.