Your Personal Liability for Business Debts

If you are deciding whether to file bankruptcy for your small business, the first question you must answer is this: Are you personally liable for your small business' debts?

Personal liability means that creditors can go after your personal assets (your income from another job, your home, or other property) if your business does not pay its bills. If you are not personally liable for business debts, then your personal assets are safe from creditors -- your creditors can only go after business income and assets. If you are personally liable for business debts, you'll have to file a personal bankruptcy in order to get rid of the debts.

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Are You Personally Liable for Business Debts?

When You Might Be Personally Liable for Corporate Debt

Common ways an owner of a corporation or an LLC might become personally liable for the business’s debts. If you are personally liable for some or all of your business debts, you will have to file a personal bankruptcy, rather than a business bankruptcy, to rid yourself of these debts.
Will You Have to Close Your Business if You File for Personal Bankruptcy?

Just because you own a company business doesn’t mean that the Chapter 7 trustee will automatically close the business and inventory its assets. It will often depend on whether the trustee can sell any business property and whether you have liability insurance.

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