If your business is in trouble, your creditors can potentially threaten legal action against your personal assets. Your business’s organization will determine how much your creditors can collect, whether you are personally responsible for your business debts, and if bankruptcy is the right option for you. If you are personally liable for your business debts, this will influence your decision to close your business or file for bankruptcy.
Business and Personal Bankruptcy
Chapter 7 and Chapter 13 bankruptcy can be filed for either personal or business debts. If you are a sole proprietor, you can file for either of these.
If you own an LLC, are a corporate shareholder, or you are a partner in a partnership and you’ve pledged collateral for business loans, your personal property will not be protected when you put your business through bankruptcy.
For example, if you want to file for Chapter 7 or Chapter 13 bankruptcy to file for personal bankruptcy, your assets may be sold off to pay your debts. There is an exception, however, for exempt properties. At the end of the bankruptcy, all your eligible debts will be discharged and wiped out.
During a Chapter 13 bankruptcy, a repayment plan will be formed where you repay either part or all of your debts over a three to five year period. Instead of losing any property to satisfy your debts, you will use your income.
How Bankruptcy Might Help
Bankruptcy can help if you are in danger of losing your home. When you file, an automatic stay stops your creditors from being able to foreclose on your home or personal property. This can help buy you some time.
Aside from this, bankruptcy will get rid of most debts that are unsecured, such as credit cards. Secured debts are treated differently, however. If you have pledged property as collateral for a loan, the creditor has the right to take that property – even if you file for bankruptcy.
If you are at risk of losing a property you would like to keep, a Chapter 13 bankruptcy may be best. Since you will still be repaying the debt, you will be able to keep your property.
If you have any questions regarding whether or not bankruptcy is a good option for you, it’s a good idea to get in touch with an experienced bankruptcy attorney, like a chapter 13 bankruptcy lawyer in Melbourne, Florida. They can help walk you through the legalities of bankruptcy and let you know how the laws apply to your situation.
Thank you to the experts at Arcadier, Biggie & Wood, PLLC, for their insight into chapter 13 and the law.