Is Your Business An Asset In Your Personal Bankruptcy Case?

Posted by on Apr 11, 2012 in Business Bankruptcies | 1 comment

Oftentimes, I get calls from individuals asking why their S Corp, LLC, partnership, C Corp, or other business entity must be accounted for as an asset in their personal bankruptcy filing.  Well, it’s actually quite simple.   The business owner has an interest in the business as a shareholder, member, or partner of the business entity.

Sure you might not even be benefitting from direct cash disbursements, or your financial interest in the business may not be readily or easily ascertainable, but you can rest assured the trustee assigned to your case will happily figure that out for you, if you don’t do that prior to filing.

In such cases, the key is understanding that the debtor’s interest in the business can come into play as an asset of the bankruptcy estate.   A good practice is to generate a balance sheet and see if the debtor’s interest in the business is potentially so valuable that it could be sold by the trustee or assumed by trustee.  Be realistic about the value of the business – if it has a financial value to you, it will likely have financial value to the trustee.  As always, consult a bankruptcy attorney for more information regarding your specific case.

One Response to “Is Your Business An Asset In Your Personal Bankruptcy Case?”

  1. I agree with this analysis, membership interests in LLCs and stock in corporations are a prime target for chapter 7 bankruptcy trustees. As suggested by Attorney Hsu, deriving a value of this asset is important prior to filing any bankruptcy petition. Sometimes a chapter 13 bankruptcy is advisable in this situation because it offers more flexibility including an absolute right to dismiss the case if the debtor simply can not agree with the trustees opinion of the value of this asset.

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