If your business partner declares bankruptcy, it can have varying effects depending on the specific circumstances. Here are some key points to consider:
Chapter 11 Bankruptcy:
If your business partner files for Chapter 11 bankruptcy, their business remains in control of its possessions and assets. This means that their business could continue operating, and you may still be able to do business with them.
However, it’s essential to monitor the situation closely and understand how their bankruptcy plan might impact your repayment if you supplied them with goods or services.
Chapter 7 Bankruptcy:
If your business partner files for Chapter 7 bankruptcy, their business operations will cease. In this case, you won’t be able to continue doing business with them.
Their personal bankruptcy typically won’t directly affect your partnership business or its assets.
Nature of Your Relationship:
Consider the nature of your relationship with the debtor. Did you supply goods or services to them, or did they supply you?
Repayment terms will be influenced by their bankruptcy plan. Be cautious of past due payments received within the 90-day period before the debtor filed for bankruptcy, as the court may demand repayment.
Consult with an attorney to explore legal ways to retain any funds owed to you.
Legal Guidance:
The Bankruptcy Code provides solutions for business owners dealing with a partner’s bankruptcy.
Seeking advice from a bankruptcy attorney experienced in handling such situations is crucial.
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