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Business owners and bankruptcy

Business owners in Kentucky may be able to keep their businesses after filing for bankruptcy in some cases. For instance, the owner of a sole proprietorship may personally file for bankruptcy while still maintaining their business. The owner of a larger company who would like to keep their business has the option of filing for Chapter 11 bankruptcy.

If a sole proprietor would like to keep their business after filing for bankruptcy, they can choose to file for Chapter 7 or Chapter 13 personal bankruptcy. Chapter 7 bankruptcy is designed for people or businesses that are unable to repay debt, while Chapter 13 bankruptcy is reserved for individuals who would like to set up a debt repayment plan. The owner of a larger company does not have the option of filing for Chapter 7 bankruptcy without liquidating their company's assets and closing the business.

Individuals or companies that file for Chapter 7 bankruptcy are protected from collection attempts by creditors. After a bankruptcy petition has been filed, the U.S. Trustee appoints a bankruptcy trustee for the case. The trustee decides what property will be liquidated to repay debts and what property a business owner will be allowed to keep. A sole proprietor who files for bankruptcy may be allowed to keep all of the property that they use for regular business operations.

A business owner who is considering filing for bankruptcy might want to talk with a lawyer about what form of bankruptcy would best suit their needs. In some cases, liquidating assets and closing a business can be the best option for financial recovery. However, there are some cases where holding onto a company through a bankruptcy filing is a smarter long-term strategy.

Source: Houston Chronicle, "Can I Keep My Business If I File for Chapter 7 Bankruptcy?," August Jackson, Accessed Feb. 12, 2015

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