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personal bankruptcy and owning a business

Hi, I operate a small business as a corporation that is not making much money. The business has a line of credit labelled `for business use only` which has my name on it as well as a cosigner`s. My question is if I file for personal bankruptcy will this affect my business? Can my business and I be treated separately? Also I have a mortgage that was cosigned by my parents and if I file for personal bankruptcy how will that be affected?

Posted from: Newfoundland and Labrador

One Response to “personal bankruptcy and owning a business”

A licensed trustee said...

Unfortunately, if/when you file for bankruptcy the shares you own in your business represent an “asset” (something that you own) that you will sign over to your trustee. In most cases, the corporation is immediately shut down as your trustee will not want to incur the risk of running it.

That is not to say that you cannot operate a business when you are bankrupt, but it will have to be structured as a sole proprietorship (as opposed to a corporation).

Whether or not your co-signed mortgage is an issue depends on what you plan on doing with the house if/when you file for bankruptcy. If the house is sold at a loss then your co-signers will have to make up the difference. If there is no loss then they don’t have anything to worry about.

Between the business and the house I think you really ought to contact a local trustee and go in and meet with them – it will prove helpful.