Personal Bankruptcy Vs. Business Bankruptcy In Delaware

Bankruptcy in Delaware is a complex process often best handled by an experienced attorney. This is particularly important in situations where there are both personal and business assets and debts. In the state of Delaware, it is possible to protect your business assets from personal creditors in some situations. It is also possible to protect your personal assets from business creditors, in some situations. It is important to understand the differences here prior to filing bankruptcy.

Filing Bankruptcy in Delaware

Individuals need to determine what their options are for filing bankruptcy before making a decision to file either personal bankruptcy or business bankruptcy. It is critical to learn all options available and what the effect is.

If you wish to file personal bankruptcy, and wish to protect your business, consider the following considerations.

If your business is an LLC, corporation or has another legal affiliation that differentiates the business assets and debts from the personal debts and assets, the business remains protected.
If you own a small business such as a sole proprietorship, it will be very difficult to distinguish between personal and business assets, in the court's decision. However, you can protect some of your business assets under the state of Delaware's tools of the trade exemptions. These exemptions are minor, unless you own a vehicle associated with the business solely. In this situation, the vehicle is protected up to $15,000 in value.
For those who file bankruptcy in Delaware and own a partnership, the state of Delaware offers protection. This is also true if your partner files bankruptcy. It will not affect your personal assets.

On the other hand, you may wish to file business bankruptcy and want to protect your personal assets from your business creditors. This is possible to do if you own a corporation, LLC or other legal entity. The key here is to realize that business bankruptcy does not discharge debt at these levels. Rather, the business must repay debt in an organized fashion. Personal assets can become involved in sole proprietorships, though.

When to Seek Legal Advice

There are instances when it becomes important to seek out legal advice before filing bankruptcy. An attorney can offer specific direction in your individual case, such as how bankruptcy in Delaware will affect your personal situation or your business situation. It is critical, in most cases, do take the property route with the attorney to ensure that assets are not lost unnecessarily during the bankruptcy case.

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