If you file bankruptcy and receive a discharge, the last thing you want to happen is for a creditor to levy you businesses bank accounts. Therefore, it is really important to understand your personal liabilities as well as your businesses liabilities. There are a few factors that determine whether a creditor can collect from your business if you received a personal/individual bankruptcy discharge. First, we need to know whether your business was a signer on the debt. And secondly we need to know the type of business entity you own.
Does Your Business Owe the Debt?
The first question is whether the business was a signer on the debt. Was the debt a business debt that the business is legally liable for? If you signed for the debt as a representative, such as the treasurer or president of the business, then the business will owe the debt. In this situation, the owner is also normally also signed a personal guarantee. A personal bankruptcy discharge will discharge the personal guarantee, however, it might not discharge the businesses liability. If the business owes he debt, then we must determine the type of entity of the business to determine whether the business is still liable after discharge?
There are a number of business entities such as Sole Proprietorships, Partnerships, LLCs and Corporations. The main question is whether or not you own a Sole Proprietorship. Only a sole proprietorship will receive a bankruptcy discharge for your personal/individual bankruptcy discharge. Therefore, if you own a Sole Proprietorship, creditors cannot go after your business after you receive a bankruptcy discharge. If you own any other type of business, then the business does not get the benefit of your discharge. Creditors can collect from any other type of business entity even if you received a bankruptcy discharge. Contact an Orange County Bankruptcy Attorney for more information.
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