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Bankruptcy For Business: Will I Lose My Incorporated Business?
By Jay Fleischman
If you are considering filing for bankruptcy, but you own an incorporated business, you’re probably wondering if your personal bankruptcy will mean small bankruptcy as well. Especially if the is a viable revenue source, you want it to keep operating after your bankruptcy discharge.
The common belief is that personal bankruptcy won’t affect an incorporated entity. After all, you incorporated your to separate your personal liability from your risks, right? If incorporation protects you from corporate liability, shouldn’t it also protect the from your personal liability?
Unfortunately, the is not protected if you file for bankruptcy protection. Although you do not technically own the corporation’s assets, you do own the stock. Since stock is just ownership rights to the business, your stock (and the ownership of the corporation) will transfer to the estate after you file for bankruptcy
protection.
Because the estate then owns the stock, the trustee can liquidate the assets of the company to pay your creditors. Once the assets are liquidated, the corporation will most likely have to cease operations – just as if you had filed for small bankruptcy.
If you want to keep your operations going, you do have the option of buying back the stock from the estate at fair value –the liquidation value of the stock. Since the liquidation value typically isn’t very high, especially if the corporation’s assets are subject to a bank’s lien, this can be a good option for eliminating your personal debt while still keeping your running.
If you are considering filing for personal bankruptcy, it will be worth your time to determine the fair value of your corporate stock, so you will know how much you will need to buy back your from the estate once your bankruptcy petition is filed.
New York bankruptcy lawyer Jay S. Fleischman is the Managing Attorney of Fleischman Consumer Law Center. He has helped thousands of New York consumers end their bill problems and get back their good credit. Go to www.NewYorkBankruptcyHelp.com to learn more about your options, ask questions, and get more information.
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