Can we file for a business bankruptcy if our home loan and business loan are combined as one loan?

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Can we file for a business bankruptcy if our home loan and business loan are combined as one loan?

We have a small retail business and due to competition, economy etc. we are barely hanging on. We are just beginning to check into business bankruptcy. However, when we refinanced a few years ago it was suggested we put our house and small business loan together for a better rate, so we did. How would/will this affect our home if we file business bankruptcy? Will we lose our home? Should we try to separate the two?

Asked on August 6, 2012 under Bankruptcy Law, Wisconsin

Answers:

Terence Fenelon / Law Offices of Terence Fenelon

Answered 8 years ago | Contributor

What is a business bankruptcy?  I have practiced bankruptcy law for over 30 years and don't know the definition of the term.

Unfortunately, the facts given in you quetion lack enough info for a proper response, but I 'll try.

The first question: what is the nature of the business?  Is it incorporated?  If so, iis it a Sub-S or a C corp?  If not, then the debts are yours and you wouldn't be able to segregate them.  All debts of an entity, business or personal, must be included in a bankruptcy filing.

If you have personal guantees with your vendors for product, those would also survive a bankruptcy filing and come back to you.

Assuming that you are incorporated, and that you placed your residence as additional guarantee for the business loan, upon the filing of the bankruptcy, the lender could proceed against you personally for the amount still owed.  You could reaffirma the debt )agree to continue paying the obligation) to prevent a foreclosure upon the note,  Many lenders will modify the terms of a loan agreement in today's bleak economy rather than acquire another piece of non-performing property to their portfolio.

I would advise speaking with an attorney in person and have available all of your documentation as it will be vital for a sound legal opinion to be rendered.

Good Luck>


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