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Would I Be Personally Liable for Business Debt in Bankruptcy?

Posted By Allmand Law Firm, PLLC || 27-Aug-2013

Discharging Debt

As an individual, being responsible for business debt in bankruptcy likely depends on the structure of your business. In some cases it may depend on how it was developed or formed. Many who seek to file for protection may operate a business as a sole proprietor, partnership, corporation or limited liability company (LLC).

If you are the sole business owner of your business, meaning it is not incorporated or known to be formed as another business entity, it is likely considered a sole proprietorship. This is often considered one entity since you and the business are considered the same. Debts incurred in this case would be solely by the owner. Creditors can chose to pursue personal or business assets to satisfy outstanding debt. In such a case, the creditor may pursue personal assets if there are limited business assets.

A partnership can vary depending on the type. A general partnership may include two or more people in which they could be responsible for debt incurred if each person is considered a general partner of the business. A limited partnership may have only one general partner who may be responsible for debt, while other members would not have such responsibility. Creditors could pursue personal assets of the general partner and not the others who are considered as a limited partner.

An LLP may vary depending on the state you live in. Some may operate where all partners have no personal responsibility while other states may require you to have one general partner who could be liable for debts such as credit cards or business loans.

Reference: http://www.nolo.com/legal-encyclopedia/personally-liable-business-bebts-business-bankruptcy.html

Categories: Bankruptcy
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