What Does Filing Personal Bankruptcy Mean for your Business?
A common concern with filing personal bankruptcy is what happens if you file for personal bankruptcy when you own a business. Many people believe that you’ll lose everything, including your business, when you file. However, this isn’t usually the case. Like most financial matters, a lot of aspects of this situation depend on your personal circumstances.
One main thing to consider is whether your business is a separate entity. If your business is incorporated, it is considered to be separate. This means that it could continue to function despite the bankruptcy of one of its owners. However a person who has filed for bankruptcy is prohibited from being a director of an incorporated business. How this applies to you specifically will depend on your situation, the structure of your business and other factors. When it comes to filing personal bankruptcy, these considerations will need to be taken into account on a case-by-case basis.
If your business is unincorporated, it essentially is the same as the person who is filing bankruptcy. This means that, in your meeting with an insolvency trustee, the assets and value of the business will be considered in the same group as your individual assets. In short, the revenue of the business will be considered to be your individual revenue.
If your business is a partnership, the partnership will be dissolved by the bankruptcy of one of the partners. The exact details of what will happen depends on the particular agreement between the partners and other aspects that are unique to the situation.
However, it’s important to remember that, even when filing personal bankruptcy, an individual is entitled to receive income and earn a living. The goal of the bankruptcy process is to give you a fresh start, not punish you unfairly. Taking away a person’s business could take away his or her ability to generate income. If this is your situation, your insolvency trustee can work with you to understand the situation in greater detail and determine the best route to take going forward.
In most provinces, exemptions are made for assets that are considered “tools of the trade” and required to actually perform the work. This means that these assets will not be seized or sold as part of the bankruptcy process. However, this does not include inventories, accounts receivable, etc. Speaking with an insolvency trustee can help you understand which assets are considered tools of the trade and provide you with detailed information on the exemptions in your particular province of residence and how your assets will be affected.
Personal Bankruptcy & Business Bankruptcy
There is a difference between personal bankruptcy and business bankruptcy. If a business is struggling and losing money, filing for bankruptcy could be an option to eliminate debt. An incorporated business is considered by law to be a separate legal entity, which provides you with some personal liability protection should the business file for bankruptcy. However, as mentioned earlier, an unincorporated business such as a sole proprietorship or a partnership has no separation between the assets of the business and the assets of the individual. This means that a business bankruptcy in this type of business is effectively a personal bankruptcy.
There are a number of different factors that come into play with businesses, individuals and the bankruptcy process. In many ways, these aspects make each situation unique. In order to find out how filing for bankruptcy will affect your business and your personal situation, it is a good idea to speak with a licensed insolvency trustee.
Working with an Insolvency Trustee
The process of filing personal bankruptcy when you own a business can be complicated. There are a number of different factors that come into play and each situation is unique. This is why speaking with a licensed insolvency trustee makes sense.
An insolvency trustee can review your financial situation and provide you with information on the options available to you. Filing personal bankruptcy may not be your only choice. By speaking with a trustee, you will learn more about the possible options. You can then use this information to make the right choice for you and your situation. Most trustees offer the initial consultation for free.
If you are thinking of filing personal bankruptcy when you own a business, speaking to an insolvency trustee can help you with the process and ensure that all aspects of your situation are handled fairly and according to the law.