{"id":13296,"date":"2022-09-29T19:06:18","date_gmt":"2022-09-29T19:06:18","guid":{"rendered":"https:\/\/jboitnott.com\/?p=13296"},"modified":"2022-10-11T18:16:50","modified_gmt":"2022-10-11T18:16:50","slug":"business-failing-how-to-protect-your-family-from-bankruptcy","status":"publish","type":"post","link":"https:\/\/jboitnott.com\/zh\/business-failing-how-to-protect-your-family-from-bankruptcy\/","title":{"rendered":"Business Failing? How to Protect Your Family From Bankruptcy"},"content":{"rendered":"

How do you protect your family from bankruptcy when owning and operating a business so risky? When you\u2019re young and single, however, the worse case scenario is that your business fails<\/a>. When you\u2019re young you learn from your mistakes. You crash at a friends place until you get back on your feet.<\/p>\n

That all changes when you have a family.<\/strong><\/p>\n

It\u2019s one thing to move back home or stay at your best friends place for a short period of time, but it\u2019s another when you have your spouse and a kid or two tagging along.<\/p>\n

So, what do you do when your business is in such distress that you can no longer pay your creditors, employees, and other expenses<\/a>? You may have no other choice but to shut down and declare bankruptcy. But, how can you make sure that your family is protected if you do declare bankruptcy?<\/p>\n

Choose the right entity for your business.<\/h2>\n

First and foremost, when setting up your business think about the best possible legal structures for your business to operate under. A sole proprietorship, for example, may be your easiest option to start out as, specifically when you\u2019re a freelancer or entrepreneur, but if you do declare bankruptcy your personal assets like your home may be jeopardized.<\/p>\n

Instead, you should form a corporation, a limited liability company (LLC), or a partnership so that your personal assets and wealth are separated from your business\u2019s assets. In short, if you do file for bankruptcy, your family should be protected from creditors. They won\u2019t be able to go after your personal assets.<\/p>\n

Don\u2019t make business personal.<\/h2>\n

Even if you set up your business structure correctly, there\u2019s still a chance that your personal assets could be seized if you use any personal property, like your home or vehicle as collateral, or sign any personal guarantees<\/a> when applying for a loan.<\/p>\n

Don\u2019t make business personal. Keep your finances separate by opening a checking account and credit card specifically for your business. And, if possible, never use your personal property as collateral for business loans.<\/p>\n

By not tying up your personal finances and property with your business\u2019s not only protects you and your family, it also makes filing taxes and record-keeping less complex.<\/p>\n

Protect Your Family From Bankruptcy\u200a\u2014\u200aFile for Chapter\u00a013.<\/h2>\n

If you\u2019re a sole proprietor, you may choose to file for either Chapter 7 or Chapter 13 bankruptcy. Both can be used for either personal or business debts.<\/p>\n

However, as attorney Shannon Miehe reminds us in an article for Nolo.com<\/a>, \u201cIf you\u2019re a corporate shareholder, LLC owner, or partner in a partnership and you\u2019ve signed personal guarantees or pledged collateral for business loans, putting your business<\/em> through bankruptcy won\u2019t protect your personal property.\u201d<\/p>\n

If you use Chapter 7 bankruptcy<\/a>, \u201cyour assets (except for property that\u2019s exempt under state or federal law) can be sold to pay off your creditors.\u201d<\/p>\n

With Chapter 13<\/a>, you can work out a payment plan over the next 3\u20135 years to pay back all of your debt. This will permit the court to put an automatic stay that will prevent creditors from coming after your home.<\/p>\n

At the very least, using Chapter 13 buys you a little more to figure out how you\u2019re going to satisfy your debts without compromising the security and safety of your family.<\/p>\n

Find out about your state\u2019s bankruptcy exemptions.<\/h2>\n

Every state has laws that designate certain property. Laws like your home and some personal possessions, as off-limits from creditors that have a lien on your property. These are known as \u201cunsecured\u201d creditors.<\/p>\n

For example, under California\u2019s homestead exemption, a family can receive $100,000 in equity protection. Florida, however, will protect the total value of your home in bankruptcy.<\/p>\n

As for other property:<\/p>\n