What is the difference between a business bankruptcy and a consumer bankruptcy?
A business bankruptcy can be filed by a legal entity, such as a corporation, but a business bankruptcy can also
be filed by an individual who has primarily “business debt”. Entities or individuals filing business bankruptcies may be attempting to eliminate or reorganize debt. A consumer bankruptcy is filed by an individual who has primarily “consumer debt”, which may include houses, cars, credit card debt, and medical bills. A consumer may need to be relieved of debt or may need to reorganize debt.
It is common for small business owners to have personally guaranteed their business debts such as SBA loans, leases, credit cards, or other bank loans. Typically, lenders and landlords do require such guarantees from an individual for business loans. If a business is not going well, the individual may need personal relief from the business debt to protect his personal assets; therefore, the individual may file a personal bankruptcy to receive relief from business and consumer debt.
The business itself, meaning the legal entity of the corporation or partnership, may also need to file a bankruptcy to handle debts of the business. A Chapter 7 bankruptcy is available to a business that is closing and liquidating assets. A Chapter 11 bankruptcy is available to a business attempting to stay open and reorganize debt or attempting to close and liquidate assets.
Please call my office for an appointment if you or your business are experiencing financial distress and unable to