Mixing Business Debt and Personal Bankruptcy - The Bills.com Blog

Bills.com Blog > Debthelp Questions > Mixing Business Debt and Personal Bankruptcy

Mixing Business Debt and Personal Bankruptcy

Wednesday, Jul 22, 2009

Question: I am filing bankruptcy and have a lawsuit filed against my construction company. Will I be liable or can that be filed with the bankruptcy? I am in Ohio.

Answer: The best thing to do would be to consult with your bankruptcy attorney for an answer to your question. Whether or not a debt owed by your construction company can be included in your personal bankruptcy filing, and whether or not the debt is dischargeable, depends on several factors, such as how your business is organized (is it a sole proprietorship, a corporation, a partnership, etc.), and the type of debt.

If your business is a sole proprietorship (SP), a debt owed by your business likely can be included in your personal bankruptcy case. With an SP, there is no differentiation between your personal assets and liabilities and those of the business; for example, if someone was hurt while working for you, they could sue the business and you personally, which could result in garnishment of your personal bank accounts and a lien on your family home.

The reason that many people choose
to incorporate their businesses is to protect themselves from personal liability in case of a lawsuit against the business. Because a debt owed by your business would be viewed the same as a personal obligation in a SP, you should be able to include it in your bankruptcy. If, however, your business is a corporation or other "limited liability" entity, your personal bankruptcy would likely not affect your business’ obligations, so this debt could probably not be included in the case.

Even if you can include the debt in your bankruptcy case, the next question would be whether or not it is dischargeable. Certain types of debts, such as taxes, fines, and various other "priority"
debts are often not dischargeable. Since you did not mention the source of this debt, I cannot comment on whether or not it may be dischargeable. Again, you really need to speak with your bankruptcy attorney. If you do not yet have an attorney, I strongly encourage you to hire one as soon as possible; bankruptcy is much too complicated, in my opinion, for most people to successfully complete a case without the assistance of a qualified attorney.

To learn more about bankruptcy, you can visit the Bills.com Bankruptcy page. I wish you the best of luck in resolving this debt, and hope that the information I have provided helps you Find. Learn. Save.

Best,

Bill
www.bills.com

Also, make sure to get a free financial health check-up with Bills IQ!

Submit questions/comments about this post:
Name (required)
Email (required never displayed)
Comments

Bill has answered all sorts of questions and has been able to provide those in need of financial guidance with helpful and valuable advice and information on their specific financial area of interest. If you need specific guidance on any of the above mentioned financial areas, feel free to Ask Bill your financial questions and get better informed. Also, make sure to get a free financial health check-up with Bills IQ!

Information provided by Bills.com is for general informational purposes only and is not be construed as legal, financial, bankruptcy, tax or other professional advice. Should you require more detailed information or specific professional advice tailored to your situation you should consult an attorney, financial planner or tax advisor.

While we believe all information provided by Bills.com to be accurate as of the date of its posting, we cannot ensure its accuracy. Use of this site and any information contained on or provided through this site is provided without any representations, warranties or guarantees. Bills.com is not responsible or liable for any decisions or actions anyone may take based on the information provided. Please see Terms of Use.
Subscribe to Bills.com RSS Feed
Bills.com Site Map > Debt Help Index Pages > Debt Help Blog Entries