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Personal Bankruptcy If a Partner in a Company

I am in a position where I will most likely have to declare personal bankruptcy . If I am a (paper-only) partner in an incorporated company (ie, I have not put in any assets or derive any income but am listed in an incorporated family business), can creditors go after assets of the incorporated family business? Or are only my personal assets at stake?
Thank you.

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One Response to “Personal Bankruptcy If a Partner in a Company”

A licensed trustee said...

Unfortunately, we can’t give you a definitive answer.

If the business is incorporated then you are not a partner – you are a shareholder. If you file bankruptcy then the shares that you own in the corporation will vest (become the property of) your trustee. The trustee has no interest in running a company so they will want to turn those shares into cash. This is where is may get sticky.

Your trustee has the same rights to sell or trade your shares as you do/did. If there is a shareholder agreement that restricts the sale then the trustee will be similarly restricted.

Ususally in family held corporations, the trustee will ask if any of the other family members want to buy your shares. If they don’t, the trustee may look elsewhere.

This is something that you want to discuss with your trustee before you file your assignment. Make certain you understand what is going to happen to these shares or you could be in for a very unpleasant surprise.