Will Personal Bankruptcy Affect My Business?
Many business owners worry that they will lose their businesses if they declare personal bankruptcy. However, should you declare personal bankruptcy, your business may not be affected. There are ways of filing personal bankruptcy yet protecting your business assets. A bankruptcy attorney can help you understand the best ways to do so. There are some considerations you should observe if you are filing personal bankruptcy, such as:
- You are required to disclose your business if you file for personal bankruptcy, since your business is an asset.
- You must report assets such as machinery or valuable inventory that your company has.
- If your business has a credit card, and you have a checking account with the bank, then the bank may take money from your checking account and use it to pay the outstanding balance on the business credit card.
What Is The Difference Between Personal And Business Bankruptcy?
There are two main types of personal bankruptcy:
- Chapter 7 bankruptcy is intended for individuals who cannot repay acquired debt. This bankruptcy type is appropriate for individuals with little income and few secured assets.
- Chapter 13 bankruptcy is meant for individuals who can manage a payment plan. Chapter 13 is for those people who are able to make regular monthly payments and repay certain outstanding debts.
When filing for personal bankruptcy, you will have to pass a means test to determine your qualification for Chapter 7 or 13. The means test calculates whether a debtor is able or has the “means” to pay his or her debts. If the person fails the means test, he or she may only file Chapter 7 bankruptcy, and then only with very specialized exceptions. While a business may file under Chapter 7, experts may advise against this as it often leads to dissolution of the company instead of reorganization. It is more common for a business to file under Chapter 11.
- Chapter 11 bankruptcy enables businesses to either reorganize or to dissolve in order to pay off debt. Reorganization is the more common option. The filing business owner is allowed to propose his or her own plans at first. After a specified amount of time has elapsed, the creditor may respond with a different reorganization strategy. If there is more than one creditor, the creditors must vote for the reorganization plan.
If you or your business faces bankruptcy in Arizona, you should contact a professional bankruptcy attorney to help you file. The attorneys at the Oswalt Law Group in Phoenix may be able to assist you with both personal and business bankruptcy issues. Call today for an appointment to discuss your case.