Can I file bankruptcy for my business with out affecting my personal credit?
During this present economic crisis, many businesses are finding hard to survive due to low consumer spending confidence
. Due to decreased consumer confidence, businesses are in deep debt due to incurring expenses. I have heard from many of my clients that shutting down the business and selling equipment also will not relieve them from debt. For this reason many are filling bankruptcy.Under these circumstances, many are concerned about the personal credit when filling business bankruptcy. Filling business bankruptcy will not affect the personal credit if your business is an incorporated entity and if the debt incurred from the business is without your co-signing personally and it is possible to file chapter 7 bankruptcy to discharge debt as long as you are not personally liable for the debt and not listed as a petitioner in the bankruptcy case.
But these days, business credit cards almost require personal guarantee by the owner and as a result will affect your personal credit as well. This will also depend on the state laws where you are filling bankruptcy.
Why people go bankrupt? No matter how careful you are, you will fall prey of debt for many reasons like job loss and illness. It has been reported that in America, the main reason responsible for half of bankruptcies filed are due to ill health and other reasons include economic crisis, loss of income, even crime, accidents or natural disasters.
The other condition could be lack of preparation. Depending on how well you prepare yourself in handling finances, unexpected and unpredicted situation cost lot of money that will lead you to debt. This is where having emergency funds; estate planning and insurance policies help you in hard times.
Sometimes a companys creditors has sized a major asset of business like a bank account or equipment through legal process then other creditors who have interest on that asset would file a lawsuit on that which could lead filling bankruptcy.
Sometimes a business files bankruptcy simply for peace of mind which is rarely a great idea with intention to stop the creditors chasing the company for the debt with chapter 7 bankruptcy.
Not in all cases the crisis leads to bankruptcy but it is our financial mistakes or decisions that cause bankruptcy. The other reasons like divorce, huge debt, job loss are in our control and can be avoided but making foolish decisions like investing in suspicious investments leads to serious consequences.
As bankruptcy can be affected to personal or business credit in future for coming 10 years it is advisable not to get panic with debt mounted and file bankruptcy. Instead look for other alternatives like debt consolidation or debt settlement services which have less impact on the credit for future. Filling bankruptcy will impact your credit score and will be listed on your credit report for 10 years. Therefore, look for different alternative to bankruptcy and consider it only as a last option to get rid of debt.
Can I file bankruptcy for my business with out affecting my personal credit?
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