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Mixing Business Debt and Personal Bankruptcy

I am filing bankruptcy and have a lawsuit filed against my construction company. Will I be liable?

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.

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Bill's Answer
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The best thing to do would be to consult with a 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 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.



(6 Votes)
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  • B
    Aug, 2010
    Great advise, even i was in same doubt but now got the best answer.
  • P
    Aug, 2010
    Bill just gave really great advice. To avoid filing bankruptcy, my husband and I pursued credit counseling to eliminate our debt before it consumed us. It worked.