In some cases, small business owners in Ohio may be able to keep their businesses after filing for bankruptcy. If the debtor owns a sole proprietorship, for instance, they can file for personal bankruptcy and perhaps keep the business. An individual may choose to file for Chapter 7 bankruptcy if they cannot afford to repay their debts, or they can file for Chapter 13 bankruptcy to repay their debts over time.
When a person owns a limited liability corporation or a partnership, they cannot file for personal bankruptcy and keep their business. These types of businesses function as separate entities, so the business and not the business owner must file for bankruptcy. When a business files for Chapter 7 bankruptcy, its assets are liquidated, and the business closes.
There is one form of bankruptcy that can allow the owner of a corporation or partnership to keep their business. Chapter 11 bankruptcy is designed so that a company can continue operating and earning money while debts are being repaid. When a business owner files for this type of bankruptcy, they may choose to continue running their company or appoint a bankruptcy trustee to take over.
A business owner who is considering filing for bankruptcy might want to speak with a lawyer about what form of bankruptcy to file. There are exemptions from the Chapter 7 liquidation requirement that would in some cases allow, for example, a sole proprietor to retain certain types of assets that are important to the conduct of the particular business, often referred to as “tools of the trade”.
Source: Houston Chronicle, “Can I Keep My Business If I File for Chapter 7 Bankruptcy?”, August Jackson, accessed on Feb. 8, 2015