Many business owners/debtors considering bankruptcy are concerned about protecting their personal assets. If a business is a corporation, some debtors assume that creditors cannot pursue them personally for debts owed by the corporation. The truth is that creditors may have the power to pursue the debtor's personal assets under certain circumstances. The most important question a business owner should ask him/herself?
Did you personally guarantee the corporate debt? Although the corporation and its owner(s) are separate, most creditors will not loan money to a corporation (especially if it's a new business) without a personal guarantee from the owner. What that means is that the owner (you) must agree to pay the debt if your corporation fails to do so.
If you personally guaranteed your business' debts, creditors may have the right to pursue your personal assets to repay the businesses' debts. In this case filing bankruptcy may help a debtor to protect his/her assets from creditors. Bankruptcy allows debtors, both individual and corporate to claim several bankruptcy exemptions that can protect assets such as cars, real estate, cash and even retirement accounts from seizure by creditors during a bankruptcy proceeding.