San Francisco Bankruptcy Attorney explains how small business owners may get hit with one-two bankruptcy punch.
San Francisco Bankruptcy Attorney explains how small business owners may get hit with one-two bankruptcy punch.
Small business owners who may be considering filing for a business bankruptcy need to be aware that the business bankruptcy filing may force them into a personal bankruptcy filing, depending on how their business is structured.
Even if your business is incorporated as an LLC, SubChapter S or SubChapter C corporation, you may still be personally liable for the debts of the company. Many company credit cards and lines of credit for small businesses use the owner’s guarantee of the debt as a means of extending credit. So, if you have taken out a line of credit and your business files for bankruptcy, the bank can force you to repay the debts of the business, even though the business is a separate corporation or legal entity.
If you business files for a Chapter 11 reorganization, the banks may be more lenient than if you file for a Chapter 7 liquidation. In a liquidation, the assets of the business are sold and the proceeds are used to pay the creditors. If your assets do not pay off your creditors, which is typically the case, the creditors can pursue the debts that have been personally guaranteed by the owner. The addition of those debts, plus the loss of income from the business, may force the owner of the business into a Chapter 7 or Chapter 13 filing of their own.
If at all possible, avoid personally guaranteeing any business debts. This keeps the business debts out of your personal finances. If you have already signed for these debts, consult a bankruptcy attorney to find out what steps you can take to avoid a personal bankruptcy if your business has to file for bankruptcy protection. It may not be too late, and your bankruptcy attorney can guide you through the process.
If you have a question regarding Bankruptcy please contact us at 1-800-941-6730 or visit www.bkanswers.com and we can connect you with one of our experienced Bankruptcy Attorneys. After you have spoken with one of our bankruptcy attorneys we can schedule you a free face to face appointment in our office location nearest you. Our team of Bankruptcy Lawyers can assist you with all aspects of your case. If you are have questions about filing a chapter 7 bankruptcy, a chapter 11 bankruptcy, a chapter 13 bankruptcy, lien stripping, cram down, a stopping a foreclosure or wage garnishment, discharging debt, etc. we can help! We have bankruptcy attorneys located throughout California who can assist your needs. Please feel free to complete our free bankruptcy evaluation and we can quickly determine if you are a qualified candidate for bankruptcy.
