Business Assets and Personal Assets

• If your business is registered with your state as a corporation, you have a legal separation between your business assets and your personal assets, such as your home. If your business is unregistered, or if you are registered as a sole proprietor or a partnership, there is no legal separation, which means the courts do not make a distinction between what you personally own and what your business owns. As a result, your home and other personal assets, such as your car and money, can potentially be taken by your creditors to help satisfy your debts.
  
  

Reorganization

• Filing for bankruptcy does not necessarily mean you have to give up your possessions. If your business is not incorporated, you can file for Chapter 13 bankruptcy, which allows you to reorganize your debt payments. When you file Chapter 13, the courts will assign a bankruptcy trustee, who will create a repayment plan for you. As long as you are able to make payments according to the plan, you will be able to keep your house and other assets owned by you and your business.
  
  

Full Liquidation

• If you have no way of making payments to your creditors, you may be forced to file for Chapter 7 bankruptcy. Under Chapter 7, your assets will be seized and auctioned off to help satisfy your debts. While you can lose your home and other assets, you may be able to completely discharge all of your debt obligations when you file for Chapter 7 bankruptcy, giving you a fresh start.
  
  

Protecting Your Home

• Incorporating your business can be complicated and expensive. If you have a small business that you own and operate yourself, it may not make sense to go to the trouble or expense. Registering your business as a limited liability company or as an S corporation can be less expensive and less complicated than other types of corporations. By registering your business this way, you create a wall between your personal assets, including your home, and your business assets. In this case, if your business is forced to file bankruptcy, your home will be protected.