It is a tough time for a Tallahassee resident when the business they worked hard to start or grow winds up collapsing underneath the weight of changing market conditions, a tough economy or other factors that may be beyond the control of the business owner. While it is not a pleasant subject to think about, in addition to wrapping up one’s business, a Florida resident may also need to think about filing for personal bankruptcy during this difficult time.
For example, if a person’s business was not a corporation or a similar business organization, then the person may be what is called personally liable for business debts. What this means is that a business creditor can legally pursue the business owner, or owners in the cases of a partnership, for any unpaid business debts that did not get settled when the business folded.
Moreover, even if an owner did incorporate, most creditors who do business with a corporation will insist that the owner sign a personal guarantee on the loan. A personal guarantee is a legally binding document which requires the owner of the business to pay back a business debt if the business fails. Once this guaranty is signed, the fact that a business owner has incorporated or formed a limited liability company matters very little. The owner is personally responsible for the guaranteed debt, and a creditor can use the law to compel payment of it.
Business debts can add up quickly, so if a business fails, an owner will likely get overwhelmed quickly by financial obligations. Fortunately, it is easier to file a Chapter 7 bankruptcy if one primarily has business debts, and a Chapter 13 may also be a viable option.