Sole Proprietor Bankruptcy -- Personal and Business Debt Combined

Sole Proprietor Bankruptcy

Unlike LLCs and corporations, sole proprietors have no legal separation between personal and business debts. When you file bankruptcy as a sole proprietor, ALL debts -- personal and business -- go into a single case.

• Chapter 7: Eliminates both personal and business debts. Business assets are included in the estate but may be protected by exemptions (tools of the trade, vehicle).
• Chapter 13: Restructure all debts over 3-5 years while continuing to operate the business. Business income funds the plan.
• Means test: Business income and expenses are included in the means test calculation. Net business income (after ordinary and necessary expenses) counts as income.