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Filing Personal Bankruptcy When You Own a Business

bankruptcy.jpgMany business owners that have fallen behind on their financial obligations are concerned as to whether they will be able to file for bankruptcy and keep their business. The answer to this question depends on a variety of factors, including the way in which your business is organized and whether you are personally liable for business debts. The good news for business owners is that, in many instances, they will be able to file for some type of bankruptcy and keep operating their business. If you are considering business bankruptcy, it is important to understand what types of bankruptcy may be available to you.

Chapter 7

If you are a sole proprietor, Chapter 7 may be able to help you eliminate both personal and business debts. Sole proprietors are individuals who are in business for themselves, and there is no legal distinction made between a sole proprietor and his or her business. In many cases, the exemptions that are available to sole proprietors allow them to keep business assets while discharging debts, allowing the business to keep operating.

Importantly, if your business is a separate entity such as an LLC, a partnership, a corporation, the business will likely not be able to file for Chapter 7, as there are no exemptions available to businesses - which means that all of its assets will be liquidated.

Chapter 13

Chapter 13 bankruptcy is only available to individuals, so business owners who are sole proprietors may utilize it to wipe out business debts, but other business owners may not. Chapter 13 is attractive to sole proprietors who have significant nonexempt business assets, as it generally allows filers to keep their assets while paying down their debts throughout the course of a court-approved repayment plan.

Chapter 11

If you are the owner of a business that is a separate legal entity with nonexempt assets who would like to stay in business, Chapter 11 may be an option to consider. A Chapter 11 bankruptcy is similar to a Chapter 13 bankruptcy in that it provides for a reorganization of debts and protections from creditors during the court-approved repayment plan period. In Chapter 11, a business can often secure financing on extremely favorable terms by providing the lender with priority on business earnings and can also reject or cancel contracts.

Choosing Which Type of Bankruptcy to File can be a Complicated Issue

Business owners who are considering bankruptcy should be certain to explore all of their legal options before filing. In many cases, there are considerations that may not be apparent to individuals who have not gone through the bankruptcy process before that could have a significant impact on whether or not they will be able to stay in business and earn a living. Consequently, anyone considering bankruptcy should talk to an attorney prior to making any decisions or filing any documents with a court.

Contact the San Jose Bankruptcy Lawyers of Diemer, Whitman & Cardosi, LLP to Discuss Your Options Today

Business owners who are experiencing financial problems related either to personal or business debts should contact an attorney as soon as possible. The skilled San Jose business lawyers of Diemer, Whitman & Cardosi, LLP will thoroughly review your case and advise you as to what type of bankruptcy, if any, is right for you. To schedule a consultation with one of our attorneys, call our office today at 408-971-6270.

Sources:

http://www.uscourts.gov/services-forms/bankruptcy/bankruptcy-basics/discharge-bankruptcy-bankruptcy-basics

http://www.uscourts.gov/services-forms/bankruptcy/bankruptcy-basics/chapter-13-bankruptcy-basics

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