Under this type of bankruptcy, a bankruptcy trustee will liquidate, or sell off, all the eligible property in order to satisfy your personal debts, including those that were taken on behalf of the business.
Taxes on Payroll Unlike the scenario described above, the Internal Revenue Service does not care how your business is organized and holds all business owners personally liable for any unpaid payroll taxes.
General Partnerships and Sole Proprietors The way a sole proprietorship works is that you and your business are the same entity, meaning that you are going to be personally responsible for your business debts.
In addition, bankruptcy can wipe out unsecured debt (debt that is not secured by property, like credit card debt). home mortgages, car loans) are another story and must be considered separately.
Because you put up property as a security for the loan, your creditor is still probably entitled to take it, even if you file for bankruptcy.