The Bankruptcy News

Small Business Bankruptcy FAQ's

It can be hard to keep a small business afloat and many times small business owners run into problems and must file a small business bankruptcy.  The line between business and personal gets somewhat blurred when bankruptcy is involved and that can be confusing.  It helps to understand small business bankruptcy a little better.  Here are some frequently asked questions about small business bankruptcy that should help you understand better.

Can I file bankruptcy on just business debts?

Your small business and your personal debts are not considered separate so you can not just file on one and not the other.  You are filing as yourself for the debts you incurred while running the business.  You are not filing as the business. 

You may have the option of separating out business debts and discharging them under a Chapter 13.  You should seek legal advice to see what would work for your situation.

If I incorporate before filing will that change anything?

An incorporated business is considered a separate business entity and you can then file on the business only and not have to involve your personal debts as well.

You may run into trouble with incorporating right before you file bankruptcy, though.  You should check with the laws in your state to ensure it will not be treated as a fraudulent transfer which could jeopardize your whole bankruptcy.

Will my personal assets be affected through the filing?

Your personal assets can be affected when you file a small business bankruptcy.  You may end up having to pay off business debts through your own personal asset liquidation.  Your business assets will be used first, though.  You will also be given exemptions to help protect your personal property.  If your business is incorporated, though, you personal assets are safe because the small business bankruptcy will be on the business only.

Can I still earn money through self employment?

This depends on local laws.  You may in some cases be able to continue self employment.  In most cases you will be prevented form using business assets in your self employment, though.

What are my options for filing as a business?

Usually as a business you can file a Chapter 13, however, if your business is not considered separate from you as an individual then you may have to file under Chapter 7.  It is best to consult with an attorney to find out your options for your particular situation.