When debtors own a business and it is not doing so well or they need to get out of a business lease due to the failing business almost always think they need to file some sort of business bankruptcy. While this obviously makes sense, often times debtors have personally guaranteed the business debts and lease forcing them to file a personal bankruptcy to get relief. Also it should be noted that a business cannot receive a discharge of their debts so a chapter 7 bankruptcy often doesn’t make any sense unless you want the bankruptcy to liquidate your assets for you because you are too lazy or don’t know what to do. A chapter 11 bankruptcy for businesses only makes sense if you want to continue to run your business and need to reorganize your debts on a payment plan. Chapter 11 bankruptcies can be complicated and very expensive. If your business is closing, most of the time it makes sense to close the business and then file a personal bankruptcy if you think you are personally liable on business debts or have personal debt of your own.
If you are considering filing a chapter 7 bankruptcy or chapter 13 bankruptcy and you own an LLC or a corporation, bankruptcy may or may not be a good option for you. If you own an business, then it will be considered an asset of your personal bankruptcy estate. The value of the interest or shares of the LLC will be determined by its assets which may not be protected under state or federal bankruptcy exemptions depending if they have any equity or value. If your LLC does not have any assets, then bankruptcy may be an option for you as there would be nothing to lose in a bankruptcy filing. For a more detailed discussion check out this article.
If you have additional questions please call Symmes Law Group at 206-682-7975 to schedule your free consultation.