About Me

Don’t Fear the Bankruptcy Boogeyman

When it comes to finances, most people think of bankruptcy as the monster hiding in the closet or under the bed. However, while it’s obviously beneficial to avoid bankruptcy if possible, the real boogeyman isn’t bankruptcy, it’s debt. Too much debt can be incredibly damaging, and it can cost you your home, your car, or even your business. As a financial planner, I tell my clients to think of bankruptcy as a weapon to use against the debt monster. Sure, it’s a last resort, but it’s effective – a bankruptcy can stop a foreclosure in its tracks and clear away debt burdens that you would otherwise have to carry for years. A good bankruptcy lawyer can be your knight in shining armor. I hope this blog will understand how to fight off debt, and when and how to use bankruptcy to banish debt for good.

Archive

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

Latest Posts

Will Bankruptcy Affect A Small Business You Own?

Posted on 21 March 2016

If you are in a bad financial position and are considering using Chapter 7 bankruptcy to help you out, you may want to visit a bankruptcy attorney before you make any decisions if you are the owner of a small business. Depending on the type of business you have, you may end up forfeiting everything your business owns by filing for Chapter 7. What will happen to your assets will depend on the type of business structure you have for your small business and on the worth of the business.

Types of business structures

For a business that is a sole proprietorship or partnership, the bankruptcy trustee handling the case has the right to do the following things:

  1. Force you to stop operating the business
  2. Seize any assets the business owns

Sole proprietorships and partnerships are often intertwined with an individual's personal assets and finances. These types of business structures do not offer liability protection from your personal assets, and therefore they will not protect your business if you file for Chapter 7 personally.

The benefit of this is that if you file a personal bankruptcy, you can include your personal debts and debts your business owes. The downside is that you might have to start all over again with a new business after you file.

A limited liability company (LLC) and a corporation are two business structures that offer liability protection. This means that if your business is one of these two types, you might not lose any of the assets your business owns when you file for bankruptcy. This is because the business is an actual entity. You do not own the assets, but the business actually owns them.

There is a chance that the trustee might go after your share of the business, though, if you operate either of these types of businesses. In this situation, you may end up losing your business assets.

The worth of the business

The second factor that affects the outcome of a bankruptcy case for a small business owner is the value of the business. If you operate a business that really does not have any assets, the trustee may decide to let you continue operating it. If you have a business that has assets and a net worth, the trustee could decide to seize the business and its assets from you.

If you own a small business, it's important to thoroughly discuss your case with an experienced bankruptcy lawyer before you decide to file. By doing this, you can determine whether this will be a good idea or not.


Share