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Should the Owner of a Small Business File a Personal Bankruptcy? Part 1

  • Wednesday, April 16, 2014

    When you started your business, did you have the dream of being your own boss? Did you quit your old job working for one boss, only to find out that you now worked for every single customer, supplier, and business contact?

    Maybe you made some mistakes when you started. Maybe circumstances beyond your control caused problems with your bottom line. Let’s face it, sometimes even the best small business operation can still run into trouble.

    Even when your business is running well, you might still have trouble with your personal finances. Whatever the case, a personal bankruptcy can often be the best solution.

    But I Thought it Had to Be a Business Bankruptcy?

    Most business owners assume that if they file for bankruptcy, it has to be a business bankruptcy. They also assume that if their personal financial situation is in trouble, they can’t file a personal bankruptcy without harming their business.

    Both of these assumptions are incorrect. In reality, a personal bankruptcy is often the best way to solve business trouble, personal financial issues, or a combination of both.

    But I Want My Business to Continue

    If your business is too far gone to be worth saving, you can shut it down when you file for bankruptcy. A chapter 7 bankruptcy will completely eliminate most if not all of your business debts. It will also eliminate any personal debts you might have.

    But what if you want business to continue? Maybe your debts are dragging your business down and a bit of debt relief would free it up to operate in the black again?

    Your only financial trouble might strictly be personal. Is a personal bankruptcy going to cause your business to close?

    In many cases, a personal bankruptcy will not force your business to shut down. You can often file a personal bankruptcy, eliminating all your personal and business debts simultaneously.

     

    In part 1 we learned that there is a common misconception that business owners cannot file for personal bankruptcy. In part 2 we will see what businesses are a viable candidate, and which can keep operating when your bankruptcy is complete.





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