Ch 7 business debt filing-should businesses be closed up?

[psears123]

Hello,

I am planning on filing a Ch 7 due to a business that has created too much unsecured debt. This debt is a combination of credit cards and lines that are in the business's name as well as personal cards and lines that I can show were used for business purposes. I have both an S corp and a Virginia Business Trust (Kind of like a Delaware series LLC). Anyways, would closing out these entities before filing be the prudent thing to do? I heard that the creditors can still go after the business' assets (i.e. my assets)even if a get a personal Ch 7 discharge.

Thoughts?

[HHM]

Yes, you will need to close the businesses. However, if there are actually assets in those corp's, there are issues. You cannot simply close a business and spirit the assets out of the business entity without paying the fair market value for those assets INTO the business entity. If you fail to "properly" liquidate the business entities, the business creditors can come after you personally, and since you committed fraud, the claim would NOT be discharged in BK. If there really are assets, then you best get a BK attorney that knows how to do business wrap ups.

[Rockwell]

In NO WAY am I qualified to give you any advice, I can only tell you my situation. I too have an S-Corp business and am filing BK7. Like you I have many debts on personal CCs that were incurred by me on behalf of my business. My business also has loans and lines of credit in the business name but with me as the personal guarantor.

My lawyer informed me that because most of my debts were related to my business, I would not be subject to a means test. I am filing BK 7 for all my personal debt and am also including the business loans that I am personal guarantor on. The difference is, I am not closing my business. I (the business) is still making monthly payments on all CCs and loans in the business name, however after BK7, I will no longer be a personal guarantor on these loans. That,s the hoped for outcome anyway.

As to my business assets, I have to furnish valuations on all equipment owned as well as a certified Business Valuation. In my case, because of the economy, the value of my business is nill and the equipment doesn't have much value either. Of course there is the chance I have to give up the business equipment in which case I will then be closing down and seeking unemployment. It really all depends on the values of your business assets. If you do liquidate your business assets, I would not spend one dime of the money before going BK.