Who Or What Can File Bankruptcy?
We have used the terms “personal bankruptcy”, “business bankruptcy” and “business bankruptcy” on this website as a shorthand in identifying bankruptcies filed by individuals (people) which are called “personal bankruptcies” herein and by legal entitles (corporations, partnerships, limited liability companies, etc.), called “business bankruptcies” herein.
These labels can be somewhat confusing, because an individual who owns and operates a business as a sole proprietor, or who otherwise has debts arising out of his or her participation in a business files a personal bankruptcy, and that personal bankruptcy involves all of that individual’s assets and debt whether owned or incurred in connection with his or her business affairs or personal affairs.
It is not uncommon for an individual client to say to us “I want to file bankruptcy just on the business” or “I want to file bankruptcy just on the business debts.” Bankruptcy does not work like that. When an individual files bankruptcy, he or she must list all of his or her debts, both consumer and business, and all of his or her assets, both personal and business.
As explained elsewhere on this website, this does not mean such individual loses her personal assets, and is prevented from paying secured debts in order to keep personal assets. The right to exempt property still applies.