I am a business owner and I have several lawsuits against my company and they have named me in the suits as well. I believe I should file a bankruptcy, will I be protected from these lawsuits and what about my company?
I am a business owner that should file bankruptcy, will my company be protected in these suits?
by readerquestion | Mar 19, 2019 | 1 comment
When a bankruptcy is filed, the person who files the bankruptcy is protected from all creditors. The creditors cannot call that person or write to them, sue them, or take any of their property. If a lawsuit has started, it has to stop. In this particular situation, if an individual who has a company (and lawsuits have been filed naming both as defendants) a bankruptcy filed by the individual would protect the individual only and not the company. A corporation is a separate legal entity and would not be protected by a bankruptcy filed by some other individual/entity.
Normally, if we have clients who have a business and this type of situation has arisen, we would think about filing a bankruptcy for the person to eliminate any obligation they have on debts that belong to the corporation and them (or maybe just debts for the corporation where they may have been erroneously identified as a defendant in the lawsuit). Many times, if a business is having problems to the extent that creditors have started filing lawsuits, it may be that the business is having serious financial difficulties and might not have anything of real value, so it makes sense, then, to close the business down and do a bankruptcy to protect the individual from any residual liabilities that the company may also be responsible for. If we did file bankruptcy for an individual in this situation, it would be either a Chapter 7 or a Chapter 13, depending on their circumstances.