It's an unfortunate fact that business owners sometimes have to file for bankruptcy protection. If you rely on your sole proprietorship for income, and the business isn't generating enough revenue for you to pay your bills, you may be considering personal bankruptcy.
What happens to your business, though? Does personal bankruptcy mean small business bankruptcy as well?
If you have a sole proprietorship, then your personal finances and your business finances are one and the same. Bankruptcy does not allow you to choose which debts will be included, and which will be excluded.
Your business assets will be scheduled along with your personal assets. Since most business assets will not be considered exempt, they will become the property of the bankruptcy estate, and will be liquidated to pay your creditors.
The liquidation of your business assets will mean, in most cases, that you will have to shut down your business.
If you want to keep your sole proprietorship running, you have a couple of options. First, you can consider filing for Chapter 13 bankruptcy instead of Chapter 7. Chapter 13 does not erase your debts, but it does provide a means for you pay your creditors over a period of time, while still meeting your day to day financial obligations.
You would repay both your personal and your business debts under Chapter 13 bankruptcy, and you would be able to continue running your business.
The other option is to incorporate your business before you file for bankruptcy. Keep in mind, doing this does not automatically mean that you will get to keep your business. The ownership will still transfer to the estate when you file bankruptcy, but you have the option of purchasing your stock back at market value. If your business does not have any inventory, and most of its assets are subject to bank liens, the market value of the stock may be less than the debt repayments you'd make under Chapter 13.

Author: Jay Fleischman

About the author:
New York bankruptcy lawyer Jay S. Fleischman is the Managing Attorney of Fleischman Consumer Law Center. He has helped thousands of New York consumers end their bill problems and get back their good credit. Go to http://www.NewYorkBankruptcyHelp.com to learn more about your options, ask questions, and get more information.

Article source: Free Bankruptcy Articles.