My wife is filing for bankruptcy. How will this impact my old business?

[JoeSeattle]

My spouse is going to be filing for bankruptcy. We both have about $50k of CC debt, $25K of which are on her cards. Non of the cards are joint accounts. So she can't afford making payments. We think it's best to have at least one us with good credit so we've agreed that she would declare. We live in a community property state. Some of these charges, probably around 40% are related to a small business.

I had a business from 2004-2008. It was a sold-pro. My father was the building and property owner and I paid him $1800/rent. Prior to 2004, my father had managed the business for 15 years. In 2004, he let me run the business, transferring just the business to my name.

Although the business has been doing better, it's still barely bringing an income. From 2004-2008, our income has averaged $12,000. We're really struggling right now.

I couldn't afford to continue paying the rent so my father took the business back in 2008. After being a sole-pro for 20 years, my father made it an LLC after he took it back.

My question:

How will the business be impacted? Some of the debt is business related. I don't want my father impacted. He doesn't even know I'm filing for bankruptcy.

[JRScott]

If you live in a community property state then the debt is owed by both of you regardless of whose name is on the cards. Thus one of you filing will not solve your problem. This is assuming the debt was generated while married and thus is a marital 'asset'.

[JoeSeattle]

If you live in a community property state then the debt is owed by both of you regardless of whose name is on the cards. Thus one of you filing will not solve your problem. This is assuming the debt was generated while married and thus is a marital 'asset'.

If my wife files and it is discharged or dismissed it will show on her file, not mine. Either way though, the creditors can come still come and try and collect from me. This is what every bankruptcy attorney has told me. Right now, I have nothing. The business didn't generate any income. I just don't know what will happen to the business now that my father has took it back

[danaf]

I wonder if this would be consider insider transfer of assets. Does this business have any type of equipment? Did you write off anything on your tax returns? Did you file jointly with your wife (tax returns?).

[JoeSeattle]

I wonder if this would be consider insider transfer of assets. Does this business have any type of equipment? Did you write off anything on your tax returns? Did you file jointly with your wife (tax returns?).

Remember, he owned and operated the business the previous 15 years. I didn't pay anything for the business in 2004. He agreed to transfer the business to me if I paid rent. He took over the business once I couldn't afford to make the monthly rent payments. This happened in 2008.

It has about $4000 worth of old appliances. I wrote off some of the needed repairs that were needed on the building, even though I didn't own the building. I did pay for these repairs though.

The only time I filed jointly with my wife was in 2007. The CC charges began in 2006, most of it between 2007-2008 though.

[danaf]

Doesn't matter that he owned it previously - you were the most recent owner and then you transferred it back to him. The trustee will want 2-3 yrs of back tax returns. Equipment is an asset. And depending on what the business is, it is not a far stretch for the trustee to inquire about equipment. Remember - just because your wife files solo does not negate YOU in the equasion - AT ALL! I filed solo in a c. prop. state and the trustee asked me lots of questions about my husband. The difference being though that I had only been married a short time and my debt was mostly from before I was married. But still, this should give you an idea that just she filing will not in any way deter the trustee asking about YOU.....esp. in a c. prop. state.

I'd consult and consider hiring an experienced attorney that deals with both personal and business BKs. You are obviously concerned about your wife's bk affecting your father's now business and rightly so. And in time, others more experienced on this board will chime in.

Worse case scenario, you will need to let time pass before anyone files bk so it doesn't appear to be an insider transfer of assets on the eve of BK. It may have been better to keep the business and file jointly as in most states, 'tools of trade' are protected by bk - but hindsight is 2020. It's obvious that nothing was done intentionally but with BK - you are smart for asking the questions and if need be, pre-planning rather than jumping straight in.

I'm not an expert at all in this. My opinion is just from bits and pieces from what I've learned along the way and it is entirely possible I don't know what the hell I'm talking about.

[JoeSeattle]

Doesn't matter that he owned it previously - you were the most recent owner and then you transferred it back to him. The trustee will want 2-3 yrs of back tax returns. Equipment is an asset. And depending on what the business is, it is not a far stretch for the trustee to inquire about equipment. Remember - just because your wife files solo does not negate YOU in the equasion - AT ALL! I filed solo in a c. prop. state and the trustee asked me lots of questions about my husband. The difference being though that I had only been married a short time and my debt was mostly from before I was married. But still, this should give you an idea that just she filing will not in any way deter the trustee asking about YOU.....esp. in a c. prop. state.

I'd consult and consider hiring an experienced attorney that deals with both personal and business BKs. You are obviously concerned about your wife's bk affecting your father's now business and rightly so. And in time, others more experienced on this board will chime in.

Worse case scenario, you will need to let time pass before anyone files bk so it doesn't appear to be an insider transfer of assets on the eve of BK. It may have been better to keep the business and file jointly as in most states, 'tools of trade' are protected by bk - but hindsight is 2020. It's obvious that nothing was done intentionally but with BK - you are smart for asking the questions and if need be, pre-planning rather than jumping straight in.

I'm not an expert at all in this. My opinion is just from bits and pieces from what I've learned along the way and it is entirely possible I don't know what the hell I'm talking about.

I've only been marred for 2 years and a small portion of the debt occurred prior to my marriage. I should also note that my father transferred the business to me 3 years before I got married. The only major assets in the business are some freezers and refrigerators, all required per the Health Department. Without these, my fathers business would not exist anymore

[keepmine]

When you start mixing a business with a personal bk plus, throw in a property transfer to an insider you no longer have a routine run of the mill bk. I'd suggest you get yourself to an attorney.

[JoeSeattle]

When you start mixing a business with a personal bk plus, throw in a property transfer to an insider you no longer have a routine run of the mill bk. I'd suggest you get yourself to an attorney.

I will be seeing an attorney soon. In the mean time, I'm just trying to get some insight from people who have gone through similar circumstances or can help me better understand what I will be going through.