If I’m self-employed and file bankruptcy can I still earn a living?

The answer is generally yes. The specifics will vary depending on whether your business is incorporated or whether you are a sole proprietor. There is almost never a problem, but if we see something unusual, we will let you know before you decide whether to file for bankruptcy.

What happens to me if my business files for bankruptcy?

That depends on the type of bankruptcy. If the business files for chapter 7 liquidation, it is closed and all employees (including you) are unemployed. If a creditor has a lien on the assets, it will eventually foreclose. Otherwise, the Trustee may sell the assets of the business to pay creditors (again, however, if the business is a sole proprietorship, the assets may be exempt in Texas).

In a very real sense, if your business is going to close (inside or outside of bankruptcy), we no longer care about it—businesses come and go. A much more significant concern is: what happens to the owners? If you have guaranties (and most creditors require them of small businesses), it is likely that guaranties creditors will look to you for payment. That is a real problem, and people will often call to discuss a “business bankruptcy” but we end-up discussing a “personal bankruptcy.”

If the business has filed for reorganization, you will probably continue to work and be paid, as long as the business is viable. The essential goal of reorganization is for that to continue.