Individuals and businesses can file for Chapter 7 Bankruptcy. When an individual files they get rid of their debts and go on with their lives. When a business files, its assets are sold to pay the unsecured creditors. But what about individuals who are sole proprietors or independent contractors?
An individual who is a sole proprietor are considered the same entity by the Courts. If the business has assets, those assets are sold to pay the creditors. If the individual owns a service business (attorney, accountant, real estate agent) there are no assets to sell. In that case the business continues on as before. If the business has inventory such as a retailer, no business must cease operations, the inventory accounted for and appraised, and the courts will decide what is sold off. Exemptions can be applied in this case to protect some of the inventory.
If the business is incorporated such as a Limited Liability Corporation (LLC) the owner has some options:
1. You can file for personal bankruptcy protection and leave the business alone;
2. you can file for personal bankruptcy protection and file a separate bankruptcy claim for the business;
3. You can file a bankruptcy claim for the business and not for yourself individually;
4. You can dissolve the business and file for personal bankruptcy protection.
Factors that can affect the success of these strategies are:
1. The degree to which you followed business formalities in maintaining the business as a separate entity from yourself;
2. The degree to which the business has its own debt and property separate from the owners;
3. The degree to which the owner has personally signed off on loans and other debt in the name of the business.
The good news is that you have a number of options. The better record keeping that you maintain, the better chance that you will have the full range of options available to you. Consult an experienced bankruptcy attorney to discuss what the best option is for you. Craig Penglase, Esquire has dealt with these issues before and can guide you towards protecting yourself and your business. Click here to speak with Craig and find out quickly and easily what your options are: https://www.penglaseandbenson….
