If you run a small business from your home, you’re probably wondering if you need to include it in your bankruptcy filing. If you are declaring Chapter 7 bankruptcy on your personal debts, do you have to get your small business involved?
This is another specific situation that may require different actions depending upon your state of residence. Bankruptcy districts throughout the country have different policies. Generally speaking, everyone who files for bankruptcy creates a bankruptcy estate. The bankruptcy estate includes all assets and liabilities. You don’t get to pick and choose. Every asset must be listed ad every creditor must be notified of the bankruptcy filing.
No matter how small and no matter how low the profit margin is, a home-based business is an asset. As an asset, it MUST be listed. Be prepared to show profit and loss from the business and provide a list of any business equipment and inventory to the bankruptcy court.
Depending on which district you live in, you may or may not be permitted to continue to operate your business when filing Chapter 7 bankruptcy. Check with an experienced attorney in your area to determine any restrictions of his type in your district.
Once the bankruptcy trustee has been assigned to your case by the court, they have the right to sell or liquidate your business in order to provide payment to your creditors. In some bankruptcy cases, the business could be put on the market to be sold. Other cases have seen business inventories seized for auction with proceeds going towards payment of estate creditors. In MOST cases, neither of these will occur. In MOST cases, a small operation without significant account receivable offers nothing of notable value that can be seized.
If you have additional concerns about how your personal Chapter 7 bankruptcy could affect your small business operations, please get in touch with the experienced southern California bankruptcy attorneys at Westgate Law.