Are you struggling to pay the debts for your business? It can be easy to think the solution is to file a business bankruptcy. However, your best option may be to let the business go and protect yourself and your family from creditors by filing a personal bankruptcy in Nebraska. The important question to ask is, “Who is on the hook for the debt”? When the person that owns the business is, creditors can sue the owner and take his or her personal property unless a personal bankruptcy is filed.
In Most Cases – Personal Bankruptcy is Needed to Erase Personal Responsibility
- If your business is a sole proprietorship, your only choice is to file a personal bankruptcy.
- If your business is an LLC or corporation (an “entity”), the owner almost certainly personally guaranteed the debt. Banks don’t loan money to small businesses without a personal guaranty.
- In these situations, unless the business owner files a personal bankruptcy, creditors can sue him or her and garnish wages and bank accounts, even though it is “business debt”.
Does the Corporation or LLC Also Need to File Bankruptcy?
- No, the business entity doesn’t need to file bankruptcy to protect the owner’s personal assets from being taken by creditors.
- Eventually the corporation or LLC will simply wither away and “die” after it stops doing business. The Nebraska Secretary of State will dissolve it after reports aren’t filed on time (they’re due every other year).
- Beware-the entity’s creditors can sue and take property owned by the business. Don’t continue to use business bank accounts!
Will You Lose Your Business Property?
- You can lose any business property that was collateral for a loan that you can’t pay.
- If the property wasn’t collateral, you may be able to exempt and keep it.
- After the personal bankruptcy, you can rebuild and start a new business without the weight of your previous business debt holding you back.
Rare Cases Where the Corporation or LLC Needs to File
- If you want to keep your business entity open and operating, you may need to file a business bankruptcy, known as a Chapter 11 bankruptcy.
- A Chapter 11 bankruptcy can be successful, but only when the business has sufficient cash flow to allow it to reorganize/restructure its debt with a repayment plan. Those payment plans can be very expensive (several thousand dollars per month), so a careful evaluation is an absolute requirement.
- If the business owner can afford a $10-$15,000 retainer for a Chapter 11, a business bankruptcy can be the right option.
Our Nebraska Bankrupcty Attorneys Can Help You Decide What's Best For Your Situation
Don’t let your business debt bog you down. Protect your personal finances by calling our Nebraska bankruptcy attorneys at Steffens Law office today at 308-872-8327 or filing out the contact form on our wbesite. At Steffens Law Office we have over 50 years of experience in bankruptcy law, and we can make a custom plan to protect you and your family from crushing business debt.