Do I Need a Chapter 11 – Small Business Bankruptcy?

A Chapter 11 bankruptcy filing is used to reorganize a business that you may want to continue to operate after the U.S bankruptcy court is finished. Chapter 11 may or may not be the best resolution for your business.

If you are running a small business and considering chapter 11 Business Bankruptcy, your business is likely organized as either an LLC (Limited Liability Company) or an S-corporation. There is a reason for these designations. It means there is not supposed to be any personal liability to you, above what you have already invested in the business. If somebody sues the business, and you have followed organizational and corporate rules, your personal assets should not be at risk. Think of it this way. If you own stock in IBM and somebody sues IBM, they don’t get to take your personal assets, just the value of your stock.

The same laws that protect IBM, also protect you from liabilities of your LLC or corporation. As long as you have not signed a personal guarantee and have followed the corporate or organizational rules, a creditor should not be able to sue you personally. Over the years the courts have established some exceptions to this rule making it easier to pierce the corporate veil. If you think you might have personal liability from your s-corp. or LLC, you should schedule a free consultation with an experienced bankruptcy attorney here.

If you are confident you do not have personal liability, it is important for you to delineate personal form corporate debt. If the debt belongs exclusively to your LLC or S-Corp. and there are no corporate assets to satisfy it, the creditor has no right to execute on your personal assets. The creditor is simply out. This is why we pay interest to borrow money. Sometimes the debt cannot be repaid and the lender is left holding the bag.

If a creditor is unable to collect against an LLC or an S-Corp, there may not be a need for a formal chapter 11 declaration that the LLC or S-Corp is not paying the debt. It may be as easy as not paying. However, there are many things that will need to be done to make sure you are not exposed to personal liability. It may also be the case that you need a personal bankruptcy to disclose the corporate debt and protect your personal assets. It is better to be safe than sorry. GET FREE HELP TODAY, by scheduling a free consultation with a great bankruptcy lawyer.