Many are unaware that filing a personal bankruptcy differs from filing on behalf of a business. Interestingly enough, there are different Chapters of bankruptcy depending on your circumstances. However, Chapter 7 can be used for both companies and individuals. As such, it’s necessary to understand these differences, explored further in the following blog, as you may consider filing one over the other. Regardless, it’s best to connect with a Memphis bankruptcy lawyer to discuss your circumstances and explore your personal or business Chapter 7 bankruptcy options.
How Are Personal and Business Chapter 7 Bankruptcy Different?
While Chapter 7 bankruptcy for businesses shares many similarities to Chapter 7 personal bankruptcy, in that the primary focus is to liquidate your assets to repay creditors, there are several differences.
One of the most critical variations is that businesses filing for Chapter 7 bankruptcy do not need to pass the means test that consumer filers must take. This process determines whether or not filers are eligible for this Chapter by calculating whether or not they make less than the median income for their state. This is because this only applies to consumer debts instead of business debts.
In addition, you’ll find that filing for Chapter 7 bankruptcy as a business or LLC will not grant you a debt discharge for business-related debts but will grant them for personal debts. This is because some businesses close and reopen under a different name to avoid their debt obligations. As such, businesses and anyone who signed a personal guarantee on behalf of the company can be pursued by creditors for any debts not paid by the liquidation of assets during Chapter 7.
Do I Need an Attorney for Both?
If you are unsure whether you should file for consumer or business bankruptcy, connecting with an attorney regardless is in your best interest.
This process can be incredibly overwhelming as there are many steps involved. For example, in both personal and business cases, you must take a credit counseling course, file a considerable amount of paperwork, and attend the meeting of creditors. As such, ensuring you have an attorney to help guide you through this process is essential, as you may make errors that put your filing at risk.
If you believe filing for Chapter 7 bankruptcy is in your best interest, it’s essential to understand that your business will likely be closed. However, this is a relief for many business owners, as they can move on with their lives and enjoy a fresh start.
At the Arnold Law Firm, we understand how challenging it can be to manage your business’s debts with any additional obligations. That’s why our team is dedicated to fighting for the best possible outcome for you. Connect with us today to learn how we can help you during these complex times.
