Can I claim business bankruptcy without having to claim personal bankruptcy. I have a LLC.

I am not licensed in your state however I can offer some general advice.

Filing a chapter 7 bankruptcy for a business is death to the business. Businesses do not get a discharge of debts but rather get the benefits of a Court sectioned liquidation process. When this process is over the business will dissolve and die. Do you see many Circuit City’s around anymore?

A chapter 11 case may allow for a re-organization of the business and its debts, however, typical legal costs will be well over $20,000.

Neither of those solves your real issue, which is that it is very likely you are also personally liable on the debts.

Many small business owners end-up filing for a personal bankruptcy and in some case allow the business to dissolve. This may eliminate all personal debt and prevent creditors from coming after the old corporation.


You should consult a local attorney who will be able to help you with your case and your state’s laws.



Good luck.




Robert Kovacs

Depending on your goals for continuing your trade, you may not need to file a bankruptcy for the business itself. Often, the biggest problem with the collapse of a small business is that the owner of the business has personal liablity on some of the "business debts." Credit cards often fall into that category. Typically, credit card applications for a business account include a personal guaranty from the business owner who set up the account. Accordingly, it is likely that the credit card companies will ultimately sue you personally if the accounts go unpaid for more than 90 days.

You should consult with an attorney who can evaluate which debts are debts limited to the business and which debts pass through to you personally. I typically ask my clients to bring in a current balance sheet for the business and a current accounts payable report so that I can determine what the business owes and which of those debts pass through to you personally. Without looking at that information, I could not tell you on which debts you are personally liable. Generally speaking, though, if the business owes state sales tax or employee withholding taxes, those obligations pass through directly to owners or officers of the company who had check writing authority. Any debts you personally guaranteed for the business are also collectible from you individually. Beyond that, I would have to know the nature of each debt to know whether it passes through the business to you.