Business vs Personal Bankruptcy
When it comes to business vs. personal bankruptcy the two may seem worlds apart, but this may not always be the case.
Have your creditors been knocking on your door a lot lately? If you owe your creditors a lot of money, but you can’t pay up, you may have heard a few threats regarding legal action. Sometimes, creditors might go after your personal property if you cannot pay business debts. Are creditors allowed to touch your personal property when it comes to your business debts? Well, that depends upon a few key factors. You see, when dealing with business vs. personal bankruptcy it all comes down to the type of business that you built from the beginning.
Whether or not your creditors can go after your personal property is determined by a couple of things. How did you structure your business to begin with? Did you personally guarantee any debts? Additionally, you may want to know that the IRS will hold you personally responsible for any unpaid business taxes. The bad news is that in the eyes of the law there is no difference between a sole proprietor and an individual. This means that if your business cannot pay off your debts, your creditors can go after your personal assets. Also, partners in business are dually responsible for debts…if your partner cannot pay, your personal property will be put on the line.
Those businesses that are considered corporations or limited liability companies often have very little to do with personal property. The problem is that most small business owners cannot claim limited liability when it comes to most business items. The majority of creditors want to see some type of personal guarantee when it comes to purchasing or leasing property (or other items). In the end, the main difference between business vs. personal bankruptcy is whether or not you have completely and efficiently separated your business from your personal property.
If all of this sounds confusing this is because there is nothing simple about bankruptcy law. If your business is in hot water, contacting a qualified bankruptcy lawyer is the only way to cool things down once again.
Business vs. personal bankruptcy laws are somewhat muddled thanks to numerous laws and a lot of legal jargon. While research can only get you so far, speaking with a lawyer is the best course of action.