13 Feb Bankruptcy and the Loss of a Business
When a business fails, the owners often find that they are left with considerable debt and have to file bankruptcy. If it was a sole proprietorship or a partnership, the owners are personally liable for all of the debts.
If a corporation or limited liability company was formed, that might protect the owners from liability. But, more often then not, even in those situations, it is likely that banks or vendors extending credit had personal guarantees signed so as to protect themselves. Thus, here too, the owners remain remain liable for the bills.
So, which do you do first: file bankruptcy or close the business? And should you file for the company or personally or both? Filing two bankruptcies can get expensive. Often it will be better to dissolve the company and then file a personal bankruptcy.
When you dissolve a formally created company, such as a corporation or limited liability company, part of the process is to send notices to the creditors so you can determine the extent of any liabilities. Knowing what is owed and to whom is a necessary first step to get rid of the debts.
Once you have a complete list of the creditors and what they are owed, you will be able to list them in a personal bankruptcy and hopefully have them all discharged. The basic idea is to make sure you are liable for all of the bills so that when you file bankruptcy they will all go away. This will work for a corporation, a limited liability company, a partnership or a sole proprietorship.
A competent bankruptcy attorney in your state can help you with both closing down and dissolving your company and getting needed relief from all of your business and personal creditors.
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