Business Assets and Personal Bankruptcy

Filing for personal bankruptcy is never a straightforward journey, and the stakes climb higher when your hard-earned business assets are on the line. At Ursulova Law Offices, we understand the intricacies and emotional toll involved in navigating the maze of personal bankruptcy in New York. This article is designed to serve as a comprehensive guide, illuminating crucial aspects of personal bankruptcy and its potential ramifications on your business assets.

Personal Bankruptcy

Personal bankruptcy is a legal avenue that allows individuals to reorganize or discharge their debts. While bankruptcy can offer a fresh start, it also has long-lasting implications on your credit score, future financial endeavors, and your business assets. Under federal law, the two primary types of personal bankruptcies are Chapter 7 and Chapter 13, each with its own set of rules and procedures.

• Chapter 7 Bankruptcy: Commonly referred to as “liquidation,” Chapter 7 allows the individual to discharge unsecured debts like credit card bills and medical expenses. However, non-exempt assets are sold to pay off creditors. If you own a business, its assets could potentially be liquidated.
• Chapter 13 Bankruptcy: This form of bankruptcy is designed for individuals with a regular income and enables them to develop a plan to repay their debts over a period of 3 to 5 years. For business owners, this could be a preferable option, as it allows for the restructuring of business debts and can safeguard business assets.

Choosing between Chapter 7 and Chapter 13 is a critical decision that can profoundly affect both your personal and business finances. Consulting a Brooklyn bankruptcy attorney can be invaluable in determining the most suitable course of action. Some of the variables to consider include your income level, the types of debt you owe, and assets you wish to protect.

How Personal Bankruptcy Affects Your Business Assets

The impact of declaring personal bankruptcy on your business assets is a multifaceted issue that varies based on numerous factors. Most significantly, the legal structure of your business and the bankruptcy chapter you opt for play crucial roles in determining what happens to those assets.

• Sole Proprietorships: If your business is structured as a sole proprietorship, the lines between personal and business assets blur, as the law considers both to be part of your total estate. This lack of distinction means that filing for personal bankruptcy puts all assets, both personal and business-related, at risk of being liquidated to pay off creditors in a Chapter 7 case. In contrast, a Chapter 13 filing may offer a restructuring plan that allows you to retain these assets while repaying debts over a designated period.
• Partnerships and Corporations: With partnerships and corporations, a layer of legal separation exists between your personal and business assets. While this provides some protection, it’s not a failsafe. If you’ve personally guaranteed any business debts or loans, those guarantees make your personal assets vulnerable to liquidation for settling those business obligations. Your Brooklyn bankruptcy attorney can guide you on how to navigate these complexities while considering both personal and corporate interests.
• Asset Exemptions: The State of New York has its set of asset exemptions under bankruptcy law, which can be employed to shield some of your property from liquidation. For instance, a portion of your primary residence’s value may be exempt, as well as “tools of the trade.” These tools can sometimes include business assets, depending on your line of work and the nature of the assets in question.

Personal bankruptcy in New York is fraught with complexities that can have a significant impact on your business assets. It is crucial to seek legal advice to navigate these intricacies successfully. Ursulova Law Offices, your trusted Brooklyn bankruptcy attorney, specializes in both personal and business bankruptcy cases and can provide the guidance you need to make well-informed decisions. Contact us today for a consultation and take the first step towards achieving financial stability.