Posted on January 19, 2010 in Bankruptcy
As a New York bankruptcy lawyer in this rough economy, many small business owners call trying to find out options for filing bankruptcy to escape their debt. You can read more general advice in this separate post concerning bankruptcy options for small businesses in New York.
One question that comes up is how are the business owners affected?
Generally, if your business is an LLC or a corporation then it has its own separate legal identity. What this means is that if creditors sue your business ("New York Acme Company" or "Acme Corp." for example) then any judgments obtained are not owed by you ("John or Jane Doe") personally. This is a very good thing and means that if your business is in trouble financially you may be able to walk away from it and just close the doors. Creditors may sue it and any assets belonging to the business will be accessible, but you: Jane or John Doe will not be.
I can’t be sued? Is that it?
Well, often not. More often than not when your business obtained a loan you may have signed the loan documents to personally guarantee any debts. This means that if the business was to default on the loan you would step up and pay. This is problematic and for large debts may mean you would want to consider bankruptcy if you cannott afford to pay this. Often, if the business is your main source of income and it hasn’t been doing well, a Chapter 7 bankruptcy is a straightforward way of resolving this. It of course comes with implications for your credit however.
There may also be many other forms of legal liability such as fraudulent transfers, de facto merger and piercing of the corporate veil, among others. The above is extremely general information and you should obtain a bankruptcy lawyer to go over your options and documents in detail.
For contact information, please go to the Dwyer & Associates bankruptcy lawyers home page. Dwyer & Associates regularly handle business bankruptcies for New York small business owners. Tel: 212-203-4757 for more information.Many small business owners want to know what their options are in bankruptcy. This post sets out some common scenarios for escaping debts.