Can You Lose Your Business If You File for Bankruptcy?
If you have been thinking of filing personal bankruptcy, you may wonder if it will affect a business you own. In some cases, it is possible to lose business assets, or even the business itself, as a result of personal bankruptcy.
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Disclosure
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Disclosure of business assets is very important in a personal bankruptcy filing. Creditors are more likely to go after assets that you have attempted to "hide" through omission.
Business Formation
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Businesses that were formed as corporations or limited liability companies are protected from personal bankruptcy. Sole proprietorships and partnerships are at significantly greater risk.
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Types of Bankruptcy
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A Chapter 13 bankruptcy allows you to keep personal and business assets while reorganizing your debt. A Chapter 7 (liquidation) bankruptcy puts your business at greater risk.
Value of Assets
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A business with significant assets is at greater risk than one in which you are the primary asset. A service-oriented business such as freelance graphic design can likely continue after a personal bankruptcy.
Payment for Assets
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Assets paid for through personal income are more likely to be liquidated than those paid for through your business, although aggressive creditors may attempt to seize business assets.
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