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socrateaser, Attorney
Category: Bankruptcy Law
Satisfied Customers: 37864
Experience:  Attorney and Real Estate Broker -- Retired (mostly)
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My husband is bipolar. From May to the second week of October

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My husband is bipolar. From May to the second week of October he was in a manic state. During this time he started a new business, contracted for office space, incurred thousands of dollars debt on his business credit card, spent his small annuity fund. He is 67 and his only income now is his social security. Should he file business bankruptcy or try to deal with debtors separately with a letter from his psychiatrist.
Do you mean that your husband created a separate legal entity (Inc., LLC, etc.), funded it and then purchased assets under the entity's name, or that he purchased the assets under his own name or under a DBA ("doing business as" fictitious business name)?
Customer: replied 5 years ago.
He did create a separate legal entity, funded it and purchased assets under the entity's name. The cars and some telephone services are in his name and we are aware that this is personal debt as opposed to business debt. My question is does he file business bankruptcy or try to deal with creditors separately although he has no assets.
There is rarely any reason to bankrupt a business, if the goal is to liquidate assets and pay any separate business debt. The reason is because the result is that if there is any remaining business debt after the business is liquidated, the creditors cannot reach the owner personally, because of the separate entity status.

If the business owner accepted/guaranteed personal liability for business debts, then a business bankruptcy will accomplish nothing, because the creditors will simply move to the owner as the target for recovery.

Either way, a business bankruptcy is a waste of money, if the goal is liquidation.

Instead, you can do this:

1. Subtract the business liabilities from assets and if there is any money left, then pay the liabilities off distribute the remaining cash to the shareholders, and just stop operating the business.

2. If there is a negative balance, then pay any debts contributing to that balance if the debt is personally guaranteed. Any non-personally guaranteed business debt can be ignored.

3. If the personally guaranteed debt is large, then your husband (and perhaps you) may have to consider personal bankruptcy to resolve the issue.

Hope this helps.
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