When you file for personal bankruptcy, whether you’re filing Chapter 7 or Chapter 13, it’s easy to assume that your personal finances are all that you need to worry about. After all, you’re trying to discharge the debt you’re carrying from your daily life. But if you’re a business owner, your decision to file for bankruptcy can impact your business partner in ways you may not expect.
Though a bankruptcy attorney in Myrtle Beach can help you better organize your filing and reduce the impact that your decision will have on your partner, you still need to know what to expect. Here are a few ways that filing for bankruptcy can impact your business partnership.
Your Partner May Have to Assume the Debt
Running a business requires a lot of money, and many business owners have to turn to loans to gain the financing they need. If you did, you and your business partner were likely jointly responsible for the loan. When you file bankruptcy, there’s a chance that the lender will look to your business partner to settle the debt in full. This means they’ll be responsible for their original share of the loan as well as yours.
Your Partner May Have to Pay Joint Debts Immediately
When you file for bankruptcy, many lenders will have concerns about the financial stability of your business, even if your business is in good shape. Depending on the terms of your loan, those lenders may require your business partner to pay the debts you shared in full immediately. This can put a strain on your business and on your business partner’s finances.
The Bankruptcy Trustee May Take Ownership of Your Share of the Business
After your debts are settled, the bankruptcy court or trustee may take ownership of your share of the business. When this happens, your business partner may need to reevaluate the way the business operates and may run into issues if the bankruptcy trustee decides to sell their share of the business to someone else.
Your Partner May Be Able to Buy You Out
By filing for bankruptcy, you risk effectively losing your share of the business. Though the bankruptcy trustee can take ownership of your share of the company, it’s not the only option. In many instances, your business partner may be able to buy you out. For most companies, this is the preferred option. It allows your business partner to take full control of the company and continue running it in the way that they see fit without worrying about the oversight or input of a party that’s unfamiliar with the business.
Work with an Experienced Bankruptcy Attorney in Myrtle Beach
Filing for bankruptcy can impact your business partner regardless of how long you’ve been in business. The key to making a smooth transition is to work with an experienced bankruptcy attorney in Myrtle Beach. The team at Lam Law Firm will guide you through the filing and identify ways to minimize the impact that your bankruptcy will have on your company and your business partner. Contact us today to schedule a free consultation.