Will I Lose My Business If I File Chapter 7 Bankruptcy?


When you are in financial trouble, filing for chapter 7 bankruptcy can provide you with some relief from your debts. If you are a business owner when you file for this bankruptcy protection, you may be worried about losing the business as well. Whether the bankruptcy affects your business depends on what type of business entity you have.


A corporation typically creates a separate legal entity that owns its assets. When the business has to file corporate bankruptcy, the bankruptcy court cannot come after personal assets. In reverse, the creditors could potentially come after your portion of ownership in the business. In most cases, however, creditors only come after your personal assets as long as they are not combined with business assets. This typically allows you to maintain business operation throughout your personal bankruptcy.

Sole Proprietorship Businesses

The situation changes drastically for sole proprietorships when you file for personal bankruptcy. With this type of business structure, you have not legally separated your business from your personal assets. This means anything you use for your business is also part of your personal assets. The bankruptcy court can liquidate any of these assets at its discretion. If you are left with assets after the liquidation, you can still operate your business.

Business Partnership

If you have a business partnership with another individual, a personal bankruptcy can wreak havoc on this relationship. With a regular partnership, you do not set up a separate legal entity. This means that any assets you have in the partnership can be taken by the bankruptcy court if it sees fit to do so. All of the assets of the partnership could be taken through bankruptcy even though they are jointly owned with the other partner.


When you file for Chapter 7 bankruptcy, disclose information about your business to the bankruptcy court. Even if you do not want to lose your business to personal bankruptcy, you still have to disclose information about it. Just because you disclose information about the business, this does not necessarily mean you will lose the business. The bankruptcy court simply needs to see all of your assets before going through the liquidation and discharge process.

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