Bankruptcy From A to Z – B is For Businesses and Business Debt

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Owning a business and needing to file a bankruptcy case can be an unnerving situation.

If your business is incorporated (or set up as any other type of business entity) it may be considered an asset in a bankruptcy case. Therefore, if the business is one that can be sold, the bankruptcy trustee may be able to sell it in order to generate money for the bankruptcy estate. If the business is not incorporated, then the trustee might force you to stop operations if continuing the business could deplete assets in the bankruptcy estate.

So if you own a business and are thinking about filing bankruptcy, there are a few questions you need to consider:

  • Would your business have value if it were to be sold?
  • Does your business own assets that could be sold (i.e. inventory or equipment)?
  • Can your business operate without your knowledge and experience?
  • Are your debts primarily related to your business?

While each item in the list above is important, it may be particularly important to know how much of your total debt is related to your business ventures.

When your business debt represents more than 50% of your total debt, you are no longer required to “pass” the bankruptcy means test in order to qualify to file a chapter 7 bankruptcy petition.

The United States Trustee also has fewer options to use to attempt to have a case dismissed if the debts are primarily business related.

This means even high income individuals may be allowed to file a chapter 7 bankruptcy case when their debts are mostly related to their business pursuits.

Questions about filing for bankruptcy as a business owner? Contact Attorney Palmer to discuss your situation.

Photo by Marianne O’Leary

by Rick Palmer

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