One More Exception
Even if your business has significant assets or inventory, you may still be able to file and not lose your business if you have a U.C.C. or other lien against it. If the trustee attempted to sell physical assets or business inventory, he would be required to pay off any liens first, before paying the proceeds of the sale to your creditors. If the lien is large enough, it may offset the value of the assets and inventory enough that the trustee would choose not to sell any of the business assets. If you don’t lose these assets to the bankruptcy, then you will likely be able to continue business once the bankruptcy is over.
So it is important to look at the value of your business as a whole, including any liens against it. If there is little value in it other than your labor and expertise, the trustee is not going to be interested in selling your assets or taking over your business as part of the personal bankruptcy process.
How Does the Personal Bankruptcy Process Work?
The first step you should take is to consult with an expert bankruptcy attorney. Filing a bankruptcy without the proper legal guidance is difficult enough with a simple personal bankruptcy. Once you add a business into the mix, it’s all the more important to have an experienced bankruptcy attorney on your side. Mistakes in a business bankruptcy can be devastating if not fatal to your case.
On the surface, filing a chapter 7 bankruptcy is much like a standard personal bankruptcy when a business is involved. Thorough details about the business and its assets have to be included in your bankruptcy petition, just as you include all other aspects of your financial situation.
Strategy is where it gets complicated. Your attorney will work with you to determine such critical factors as; where and when to file, whether assets or inventory should be sold prior to filing, what to safely do with the proceeds, how to properly characterize business assets/inventory and other such issues. He will also play a critical role in communicating with your trustee, both prior to and during your bankruptcy hearing.
What Happens When it’s All Over?
Assuming you have the right kind of business and your attorney strategized correctly, your debts will be completely discharged when your bankruptcy has concluded. This will include both your personal and business debts. You will be able to continue with your business as usual, except this time, it will be operating free from most if not all debt.