Debt owed by a business may not be significantly different than any other debt. If someone is a sole proprietor or has co-signed a debt for their LLC, Corporation, or other business entity, their creditors may often agree to settle the debt. However, by filing a Chapter 7 bankruptcy, the owner can typically eliminate these obligations. Or these debts can also be wholly or partly repaid through Chapter 13 Bankruptcy. However, if these business debts are for taxes, secured debts financing business purchases, or problem debts, such as those obtained by fraud, there will be the same issues to eliminate these debts as there would be if the debts were simple personal debts.
However, it is a relatively unknown fact that business entities cannot receive a discharge of their debts through Bankruptcy. As a result, nothing can be accomplished by filing a Chapter 7 Bankruptcy to liquidate the assets of a small business organized as an LLC or Corporation. Instead, protecting the individual business owner from creditors is usually the more critical issue to focus on, as individuals can eliminate their responsibility to repay debts they co-signed for their business.
One significant benefit is available in bankruptcy if the business portion of debt is over half of the debt. The Means Test may not be required in that situation.
Would you like more information about these options? Request a same-day call back from our team at (702) 551-3256 or schedule a comprehensive consultation with Dorothy Bunce, our attorney. The initial consultation is always free.
