Will My Small Business Be Impacted By My Personal Bankruptcy Filing?

Anyone in Oak Park who is considering personal bankruptcy and who also owns a small business should begin working with a lawyer as soon as possible to understand the potential implications of consumer bankruptcy for their business. If you are considering personal bankruptcy and you are wondering whether your small business will be impacted, the short answer is that it depends upon your situation. In many circumstances, a small business owner can file for personal bankruptcy without affecting the business. However, in situations where the small business and the business owner are the same legal entity, personal bankruptcy will also have to be business bankruptcy. Then, depending on the type of bankruptcy you are planning to file for, you may be able to keep your business open. Our Oak Park bankruptcy attorneys can provide you with more information.

Personal Bankruptcy for Sole Proprietors

If you are planning to file for personal bankruptcy and you are a sole proprietor, you should know that your bankruptcy will be both a personal and a business bankruptcy under the Bankruptcy Code. Why is this the case? Sole proprietorships are not their own separate entities. As such, the business owner and the business are, in effect, one and the same. This means that all of the business debts will be included in the individual bankruptcy proceeding. Likewise, if a sole proprietorship was struggling and the business owner wanted to file for business bankruptcy, the business bankruptcy would need to include the business owner’s personal assets, debts, and finances.

What does a personal bankruptcy mean in terms of keeping a sole proprietorship open or having to close it? That will depend upon the type of bankruptcy you are planning to file for. If you file for Chapter 13 bankruptcy — a reorganization bankruptcy — you will be able to keep your sole proprietorship open and will be able to reorganize business debts along with personal debts. However, if you file for Chapter 7 bankruptcy — a liquidation bankruptcy — all of your non-exempt assets will need to be liquidated in order for you to receive a discharge of your debts. When the bankruptcy court determines what constitutes exempt and non-exempt property, all of your business assets will also be included. Accordingly, with a Chapter 7 bankruptcy case, you will need to plan to close your business.

Personal Bankruptcy is Unlikely to Affect Other Types of Businesses

Generally speaking, personal bankruptcy is unlikely to impact other types of businesses. For example, if you are a partner in a partnership or if you are a member in a limited liability company (L.L.C.), your personal bankruptcy is unlikely to have a significant effect on your business since the business is its own separate entity. There are some circumstances where this could get tricky, such as if personal finances have been commingled with business finances. In general, however, your business will be separate from your personal bankruptcy.

Any questions concerning the relationship between personal and business bankruptcy should be discussed with a bankruptcy attorney.

Contact Our Oak Park Bankruptcy Lawyers Today

One of our experienced Oak Park bankruptcy attorneys can speak with you today about your circumstances. Contact the Emerson Law Firm to learn more about bankruptcy in Illinois.



See Related Blog Posts:

Benefits You Receive and Your Consumer Bankruptcy Case

How Much Debt is Enough to File for Bankruptcy?

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