Personal Bankruptcy Vs. Business Bankruptcy In Virginia

In Virginia bankruptcy filings, individuals who own a business need to take special care when filing bankruptcy. Under bankruptcy laws, in order for there to be a separation between business and personal assets, the business must be classified property, generally with any other classification outside of a partnership or a sole proprietorship. In other types of business ownership, such as an LLC or corporation, the individual's property and business property is the same.

Which to Choose

Under Virginia laws, there are some levels of protection in place that can help a business owner to file bankruptcy. The key is for the individual to know what his or her differences and options are.

First, consider the type of business you have. It is very difficult to distinguish between personal and business assets and debts in a sole proprietorship. File bankruptcy in this situation if:

• You wish to dissolve the business.
• The bankruptcy's assets are protected under personal bankruptcy exemptions.
• You are planning to file Chapter 13 bankruptcy rather than Chapter 7 bankruptcy.

If you are filing bankruptcy and you own a partnership, the state of Virginia offers protection for your business. Specifically, your business partner is not harmed by the personal bankruptcy filing. Therefore, in partnership situations, as long as property is able to be divided, this may offer protection at least for the partner.

If you own a corporation or other legal business entity, there are options available to you as well.

• If you need to file business bankruptcy, you may pursue Virginia bankruptcy filings for reorganization of the business. This type of business cannot receive a discharge of debt.
• For those filing personal bankruptcy in Virginia who own a corporation, the business is protected.  The two are separate entities.
• If you are filing business bankruptcy in a corporation, personal assets of the business owner are protected under bankruptcy laws. You do not have to worry about the personal implications on your assets.

The defining aspects of Virginia bankruptcy filings for business and personal bankruptcy has to do with the asset division and whether the law recognizes the business as a sole entity, separate from the owner. It is always recommended that individuals hire an attorney to work through this division.

When to Hire an Attorney

Hire an attorney before Virginia bankruptcy filings occur. Discuss with the attorney options and concerns about business and personal bankruptcy. Learn what options are available in your particular instance, including which exemptions Virginia offers may apply.