What should be do regarding a business bankruptcy?

UPDATED: Sep 30, 2022

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What should be do regarding a business bankruptcy?

My husband and I bought a franchise license for a smartphone repair store. After a 1 1/2 years of being open, we are just not making it and need to cut our loses. We bought a franchise license which cost 30K and then spent an additional 110K in buildout costs to open the store front. Then spent another 80K in just the operational/overhead costs between now and then, to help keep afloat. In addition, we are 20K in over our heads on credit card debt. It’s just not working and don’t know what else to do other than file for bankruptcy. This has taken a toll on our family, our health, mental state and it’s just not worth continuing. What steps do you recommend we take from here, if we do file for bankruptcy? We cannot afford to spend any more money on this. My fear though with bankruptcy is could this go on our personal credit? We opened the business under a corporate business entity. Also, will the 20K credit card debt need to be repaid?

Asked on September 28, 2016 under Bankruptcy Law, Texas


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 6 years ago | Contributor

1) The bankruptcy of a corporation will not affect the credit of owners or employees of the corporation. The corporation is a separate legal entity or person.
2) Remember though, that if you personally guaranteed any debts, or signed any leases, contracts, etc. in your own name rather than the name of the corporation, you are personally liable, and the corporate bankruptcy will not discharge the debt.
3) Credit card debt is the personal debt of the person to whom the card is issued, even if a business name is also on the credit card and even if the business paid the credit bills for you. Therefore, you will have to pay the credit card debt or file personal bankruptcy to discharge it.

IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although AttorneyPages.com has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.

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