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Will Business Debt Affect Your Personal Property?

Posted on September 27th, 2020 by Oddo & Babat, P.C.

Personal Injury Lawyer

When your business owes money, creditors will try a lot of different tactics to get the money you owe. Some will start leveling threats against you. For a lot of business owners, the idea of creditors taking their personal assets because of business debt is terrifying. After all, while business has its own set of risks, you don’t want to consider losing your car, your home, or your personal finances due to business debts.

If creditors demand your personal assets, then you may not be too far away from personal bankruptcy. Fortunately, there are ways to keep your business finances separate from your personal finances. You may not have to file personal bankruptcy when dealing with creditors and business debts.

Will Business Debts Affect Personal Property?

If you are a sole proprietor, then your business debts can affect your personal property. All of the debt that your business owes is personal debt. You are liable to pay back all loans and must use your personal assets if you have to. When you’re a shareholder or LLC owner, you can protect your personal property unless you pledged collateral for business loans. If you pledged collateral, then creditors have access to your property.

Should You File Personal Bankruptcy?

If you are already in trouble with creditors and need a tool to help you get out of debt, then you may want to consider bankruptcy. There are two types of bankruptcy that you may qualify for — Chapter 7 and Chapter 13. When you declare bankruptcy, creditors are no longer allowed to foreclose on your home or take your personal property. This buys you some time to figure out what to do next.

In Chapter 7 bankruptcy, you discharge your unsecured debts. With Chapter 13, you have a debt repayment plan that helps you spread your payments over five years. Chapter 13 is best for those who may have property tied up in the debt. For instance, if you pledged your home as collateral, bankruptcy cannot stop the creditors from taking your home. However, if you declare Chapter 13, you can keep your property while paying your debts.

If you own a business, you know how difficult it can be. If you owe debts because of your business, it’s important to consider how that might affect your personal assets. To find out about how your business debt may affect your personal assets, set up a consultation with a Chapter 7 bankruptcy lawyer from Pioletti Pioletti & Nichols.

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