As a business owner, you know that any investment that you make could be a potential risk. When you invest your money into a company, you always hope that you will be able to turn a profit and make more than you spend. Unfortunately, this is not always the case. Many businesses go into debt for a number of reasons. As a business owner, however, you don’t want to lose everything that you own. Many business owners worry about losing their homes or personal assets. It doesn’t necessarily have to be this way.
Here is what you need to know about your business’s bankruptcy and how it may or may not affect your personal finances.
Is Your Business an LLC or a Corporation?
Your legal organization is going to determine how your bankruptcy affects you personally. If you are a sole proprietorship, then your business is not separate from you as an individual. If you have to file bankruptcy on behalf of your business, then you have to file personal bankruptcy too.
However, if you are an LLC or a corporation, then your business is a separate entity. This means that any of the financial matters that you have to deal with involving your business is separate from your personal finances. The only time that there may be an exception to this is if you paid some of your personal expenses with the business accounts.
Can You File Chapter 7 or Chapter 13?
If you file bankruptcy for your business, you can still file Chapter 7 or Chapter 13. There are still options with business bankruptcy! Chapter 7 bankruptcy will discharge most of your debts whereas Chapter 13 can reorganize your debts and help you better pay them off in the future. Your decision will depend on the type of debt that you are in and the type of money that your business brings in regularly. Naturally, a bankruptcy attorney can help you decide which to file.
To file for bankruptcy is common. Many businesses have to file for bankruptcy, but many business owners shy away from it in fear that they may lose their personal assets. The truth of the matter is that you may not necessarily have to lose any personal assets and it may not affect your personal finances at all. To find out your options for business bankruptcy, consult with a lawyer as soon as possible.