Business bankruptcy myths: Can you tell fact from fiction?
On behalf of Furr & Cohen, P.A. posted in business & commercial bankruptcy on Friday, December 18, 2015.
Bankruptcy in general is a topic charged with myth and worry. It’s no wonder so many fears exist about a topic that can make a huge impact on personal or business finances, but if you or your business are struggling with debt, it’s time to cut through the myths and understand what is fact about the bankruptcy process. Understanding your legal bankruptcy options lets you make the best decision for your business.
One myth is that, by filing for bankruptcy or filing a business bankruptcy, you hurt the credit of your spouse. This isn’t true, because bankruptcy itself doesn’t affect your spouse’s finances unless his or her finances are integrated with yours or with the business. So, for example, if you personally file bankruptcy and include debts you jointly owe with your spouse, he or she is affected. If you file for a business bankruptcy and you are the sole owner and signer for any debts, your spouse may only be impacted by the liquidation of your assets. If the business is a corporation, then your spouse might not be impacted at all.
A second myth is that you can go to jail for not paying debts, In the United States, this isn’t true. What you can go to jail for, however, is falsifying public corporate records or stealing from your business or employees. If personal or business finances are tough, being honest about it and seeking legal relief is always a better option than shady activity on the books.
A third myth is that you should make good on personally guaranteed debts before filing for a business bankruptcy. This might be considered a preference payment, and the bankruptcy trustee can try to recover that money to pay other creditors in what he or she considers a more fair manner.
Working with a legal professional before and during the bankruptcy process helps you make the best choice for you and your business. Options include several types of bankruptcy, and legal assistance helps guide you through the process to avoid costly mistakes.
Source: Huffington Post, “5 of Our Favorite Tips for Dealing With Business Bankruptcy,” Nancy Laws, accessed Dec. 18, 2015