When it comes to businesses filing for bankruptcy, there is no co-debtor stay in Chapter 7 or 11, so the third parties are not protected from collection. However, there is a co-debtor stay in Chapter 13 which is only for individuals.
Can I Discharge SBA Loans In A Bankruptcy?
Generally, yes. I advise being very wary of the contractual provisions, such as stating the debt cannot be discharged in a bankruptcy, which would be a violation of public policy. Therefore, almost any loan can be discharged in a bankruptcy other than those specifically indicated in Section 523 of the Bankruptcy Code, such as student loans, certain taxes, fines and restitution in a criminal case and domestic support obligations.
What Happens To Personally Guaranteed Business Loans In A Small Business Bankruptcy?
If a business goes into bankruptcy, and you’ve made a personal guarantee, you are still liable for repayment of that loan. Business bankruptcy does not exempt you from personal liabilities on business loans. Therefore, I usually advise clients in such a situation to pursue a personal bankruptcy instead of a business case.
Is It Better To File For A Business Bankruptcy Or To Dissolve my Business?
It depends on the situation. There is a law in Virginia stating that you cannot move assets within the 5 years prior to collection of a debt if you were insolvent at the time you moved those assets. We must analyze your situation before advising you to file bankruptcy or dissolve your business. Generally, dissolving the business seems to work best, but it depends on how much “noise” the creditors are making and whether the owners of the company can live with the noise as the business winds up its affairs.
What Happens If A Sole Proprietorship Files For a Bankruptcy?
A sole proprietorship is a one-owner business, or in some cases, a business owned by a married couple that has not been incorporated or structured as a limited liability company or a corporation. If you started your own business but haven’t created a formal corporate or LLC structure, you have what’s called a “sole proprietorship”. From a legal perspective, there is no separation between a sole proprietorship and its owners. If you owe debts to business creditors, they can sue you personally and take your personal assets, such as your home, your car, and your money to satisfy the judgment. Because your business is not a separate entity, it can’t file its own bankruptcy like a corporation could. Instead, you must to file a personal bankruptcy to rid yourself of that business debt. There is a major advantage if most of your debts come from your business because you will be eligible to file a Chapter 7 bankruptcy without having to pass a means test.
Also, a sole proprietorship can file a Chapter 11 reorganization, and there is a new Subchapter V of Chapter 11 for small businesses.
Can An LLC File For Bankruptcy?
Yes. An LLC is like a corporation, and is allowed to file bankruptcy the same way a corporation would. An LLC is required to file a corporate resolution, which is usually filed by someone who identifies as a member or member-manager.
Is My Spouse Going To Be Liable For Any Of My Business Debts?
Not if they didn’t sign for the debts. Being married doesn’t make you automatically liable for your spouse’s debts.
For more information on Automatic Stay For 3rd Parties in Virginia, a free initial consultation is your next best step. Get the information and legal answers you are seeking by calling (540) 788-2273 today.