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Personal Bankruptcy and Owning a Business

Many individuals that are going to file for personal bankruptcy are often business owners. They are concerned as to how their personal actions are going to affect their business in regards to the bankruptcy position.

Different Debts

How the bankruptcy will affect the business depends on many factors. It will depend on the business ownership and how it was organized. It will also depend on which chapter of bankruptcy the individual is filing for. In a Chapter 7 bankruptcy the business may be considered as an asset of the individual filing and as such it could be liquidated. It is highly important that individuals in this situation retain the services of an experienced Louisville bankruptcy attorney.

Businesses cannot file for a Chapter 13 bankruptcy if the business is a sole proprietorship or you own shares in a corporation. You can file as an individual person for a Chapter 13 and then list your property interest in the business to exempt it. How the bankruptcy is going to affect your business is going to depend on whether it is a sole proprietorship, limited liability or a corporation.

As a sole proprietor, if you file for bankruptcy the courts will not distinguish your business and you as two different entities. With a LLC business it is recognized as a separate entity and only your portion of the business ownership will be affected by your bankruptcy. The same applies for a corporation.

With the bankruptcy laws being so complex it is highly important to have professional advice and guidance so that you know exactly what is going to happen with the assets of your business, no matter which chapter you are filing under.

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