Personal Bankruptcy Vs. Business Bankruptcy In Connecticut

Filing bankruptcy in Connecticut is a big decision. This is especially true in situations where an individual has a business. In many cases, Connecticut bankruptcy law does not distinguish between personal assets and debts with those of the business's unless the business is recognized as its own entity. For some, filing a business classification is the first step in organizing debts to protect and divide property among personal and business filings.

When to File Bankruptcy in Connecticut

Prior to filing bankruptcy in Connecticut, an individual needs to make a key determination in the type of bankruptcy to file as well as the options available for separating business and personal assets. In the state, sole proprietorships and partnerships do not require legal organization. If you have never registered your business as a corporation or an LLC, then it is likely defined as a sole proprietorship. Even informal partnership agreements that link more than one person to the business can form that type of organization.

Why does this matter when filing bankruptcy in Connecticut? The first reason to consider this is when you wish to file business bankruptcy and want to keep your personal assets protected. Here are a few things to keep in mind in this situation.

If you own a sole proprietorship, there is no division of personal and business property. Choose to file Chapter 7 if you do not have a significant number of assets related to the business or nonexempt assets.
If you own a proprietorship, the Connecticut bankruptcy exemptions do provide some protection here. If your partner files bankruptcy, your personal assets are protected from his creditors.
If you own a corporation, your assets are divided by personal or business use. In this situation, business bankruptcy is not going to interfere with personal assets, assuming that you have a clear division of how those assets are used.

In situations where you wish to file personal bankruptcy and wish to protect your business's assets, the only route to take is to ensure the business has a separate entity or that any and all tools of the trade are protected under Connecticut's exemptions for this. In the state, this includes arms, uniforms, tools, books, farm animals and instruments necessary for business operations. There is no limitation on value.

Hiring an Attorney

If you are unsure of what type of bankruptcy to file, or how to keep personal and business assets separated, it is critical to work with an attorney. When filing bankruptcy in Connecticut, the attorney can determine what exemptions or other protective devices are available to cover your property.

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