Many times, business owners end up filing for personal bankruptcy when their LLC or corporations fail. This is a shock as the creation of LLC was primarily done to avoid having any personal liability to business debts. Los Angeles based bankruptcy law firm Recovery Law Group states that many options are available for people with personal business debt. You can choose your bankruptcy option depending on whether your business is LLC, corporation or sole proprietorship; what’s your personal liability for business debts and what are your future expectations regarding your business.
If you have a corporation that has liability for certain business loans apart from some commercial leases, no assets and you no longer wish to continue running it then bankruptcy can be a way out. to make sure that you are not held liable personally for any of the business’s debts (since you were the guarantor for these debts), you will need the assistance of bankruptcy lawyers. You can seek to consult with experienced bankruptcy lawyers by calling 888-297-6023.
- Chapter 7 bankruptcy
People with low income can qualify for this bankruptcy chapter. You can protect most of your assets and get a quick discharge of debts too. It will also clear you of personal liability of corporation’s loans, leases apart from any medical or credit card debt you have. The corporation will remain liable for business debt, for which you need to file a business chapter 7 bankruptcy. You can also consult a CPA regarding revoking your S-Election for becoming a C-Corporation before the bankruptcy filing. This way you can get debt income forgiveness within the business.
- Chapter 13 bankruptcy
If you wish to protect your assets, have debt under $ 1 million and an income which makes you unable to qualify for chapter 7, then chapter 13 is the best chance. Additionally, you can also let go of any personal liability for your corporation’s leases and loans, however, this can be done after completion of your 5-year repayment plan. Reorganization of debts takes place in this case through which you can repay part of your debt unlike liquidation of assets (as in chapter 7). You can also consult your CPA with respect to the advantages of withdrawing your S-Election to become a C-Corporation so that you can ask for forgiveness of debt income inside the business.
- Chapter 11 bankruptcy
In case your income is above the state median and your debt over $1 million, you cannot file for chapter 7 or chapter 13 bankruptcy. Chapter 11 bankruptcy is the only option for you. you can get rid of the corporation’s debts and pay some portion of the debt through the Chapter 11 plan.
To protect yourself from personal liability of business debts, you need to consult experienced bankruptcy lawyers. They will help you decide the best course of action to get rid of unsurmountable debts.