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How to avoid (handle) bankruptcy

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simplymoto

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*touch wood article*

I know it's common sense as "private limited" means that the owner's liability is limited.

However when a company goes bankrupt is it possible for the creditors to come for the director/CEO /owner's personal stash. For example a rich creditor might file for some legal action to claim personal money on the ground of negligence or fraught, and that will get the owner's assets frozen and end up in years of legal entanglement.

How do we as entrepreneurs avoid this? Apart from being righteous and diligent are there any ways to shield ourselves from this? What if an entrepreneur has two companies, is the running company able to shy away from problems if a creditor sues the failed one?
 

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Kak

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This is a pretty good article on the matter. For the most part, a corporation protects you from liability. It however is not a license to screw off with no repercussions.


I flat out suggest business bankruptcy to people who have a big hole to dig out of. I would not want to spend years with growth throttled just to pay off bad debt. It is the law as written. A tool you pay for that is baked in to your interest rate.

It is always looked at like business suicide, but a lot of large companies seek those protections and come back stronger.
 
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simplymoto

simplymoto

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Sep 21, 2019
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This is a pretty good article on the matter. For the most part, a corporation protects you from liability. It however is not a license to screw off with no repercussions.


I flat out suggest business bankruptcy to people who have a big hole to dig out of. I would not want to spend years with growth throttled just to pay off bad debt. It is the law as written. A tool you pay for that is baked in to your interest rate.

It is always looked at like business suicide, but a lot of large companies seek those protections and come back stronger.
Thanks! Much appreciate the link.

I have heard of individual declaring bankruptcy too, and what their debts get wiped out and they can't own assets or properties for 3 - 5 years (depends on country) and after which their record is cleared.
 

Alleghenyman

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Thanks! Much appreciate the link.

I have heard of individual declaring bankruptcy too, and what their debts get wiped out and they can't own assets or properties for 3 - 5 years (depends on country) and after which their record is cleared.
You really need to consult a good bankruptcy lawyer if you’re thinking about this seriously. A properly done bankruptcy with the right business lenders can put a struggling company on solid ground again - IF it has valuable assets.

For personal bankruptcies the bankruptcy law of your country will govern what assets you get to keep.
 

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