Are you considering filing for Chapter 7 Bankruptcy, but worried about what will happen to your business? Will your means of making a living be protected? Here’s what you need to know:
When you are a sole proprietor, your business and you will be treated as one. You are able to discharge the applicable debt (personal and business) through a Chapter 7 Bankruptcy in your name.
The bankruptcy exemptions enable protections for your personal and business assets. The amount will depend on the state in which you reside. So, speak with your attorney about all personal and business assets prior to filing.
However, if your business utilizes costly items like equipment or goods and supplies, it may be difficult to keep the business after filing. The trustee may need to sell off nonexempt property, making it difficult to continue running your business.
Can the Trustee Shut Down a Sole Proprietorship?
It depends on the situation. And, while it is possible that a trustee can shut down a sole proprietor business given the right circumstances, if you want to continue operating your sole-proprietorship business, it is definitely possible so please discuss the possibilities with an attorney.
The trustee may also consider liability issues when deciding whether or not to shut down the sole proprietorship. So, you will have to have liability insurance for your business. In the event of a lawsuit, the trustee is considered a nominal owner and can be named as a defendant in the lawsuit. If the lawsuit is successful, the resulting judgment will be an additional expense with priority ahead of the prepetition creditors.
But, What If You Want to Continue Your Business?
If you wish to continue operating your business and file for bankruptcy, speak with your attorney about incorporating your business before filing. You can also file under Chapter 13. Under a Chapter 13, you can continue running your business and receive a discharge of your debts after your plan is completed.
Need More Information?
At the Law Office of Daniela Romero, we believe in relationships that are based on trust. Before we work together, we would like you to get to know us. We want you to be sure that we are the perfect fit for you. This will allow you to be completely comfortable sharing intimate and difficult details of your case. Call us today to set up a free consultation.