Self employed-Will I lose my business?

[whitekr]

If I file for BK, will I lose my business? I own two, and although some of the debt I have occured is from them, they are profitable and I can't afford to lose them or I will REALLY not be able to pay the bills.

I know I need to talk to an attorney to get a solid answer, but we are not at that point yet, and this is my biggest concern.

Thank you!

[JusticeForAll]

If you are a corporate officer of either of these, then the Trustee will be looking at both very closely.

It is my understanding that if you file a Chapter 13, you retain your assets (business included), in a Chapter 7, the Trustee takes over your estate until it's settled.

If the businesses are profitable and or have inventory/assets, they can be siezed by the Trustee to pay off your debts.

When you file personal BK and you own a business, it can get quite complicated. Doubtful you will lose the business, however, in a Chapter 7, the Trustee can take over the business if he/she believes there is enough profit or assets to help pay down the debt.

This is my understanding from my own case, which was under old law. Don't know if that has changed.

Definately contact an attorney and see what he/she has to say about the Trustee's in your district.

HTH

[JusticeForAll]

Also, the Trustee will specifically be looking for debt incurred by you personally for the business. If it is found, that debt will likely not be discharged in a Chapter 7, and/or not included in a Chapter 13.

Be preapared to hand over your books for both businesses for the last 5 years.

[whitekr]

Hmmmm, that's what I was afraid of. I think I qualify for ch 7. Until last year or so, my bookeeping was messy. I let my personal and busienss finacnes get mixed up. (For example, use the busienss account to pay for a major home repair, then charge business expenses to a credit card)-part of why I am in this mess.

So if the trustee decides to "take over" the business, there goes my income. It seems like they punish small busness owners-almost like if they garnished the wages of someone who is an employee to pay back the debts. When they do that, how is one supposed to start over and pay bills?

[kcj]

Old law Ch7 case here. We had to buy back our business from the trustee - he is taking the amount that we had in A/R on the date we filed. We don't have any inventory or assets (save one laptop that is needed for field work).

Just be honest with the trustee, and try to get a clean record of what happened, even if that means making an excel sheet showing what was comingled between business and personal.

[JusticeForAll]

Well, if you file for a Chapter 7, technically you are turning over your "financial affairs" to the Trustee. While you are in a Chapter 7, the Trustee has complete control over your financial affairs.

Unless your business is worth millions, it's highly doubtful that the Trustee will "take it over". But if you have inventory that is paid for or office equipment or anything of value that is an asset, not a liability, they can and will look to the business to "pony" up. ESPECIALLY if you have paid personal bills or made personal purchases from the company and vice versa.

One other thing to consider as a business owner. When you start "mixing" your money like this, you run the risk of losing your personal liability protection as a Corporation (if you are one). Once a share holder of a corporation starts mixing his personal financial affairs into the Corporation, it's really easy for for anyone that you owe to pierce the Corporate "veil" and come after you personally for the liabilities of the Corporation, including law suits, Accounts Payable, Tax debts, etc., and vice versa. They might not be successful, however, it's a new era and there is some case law involving exactly this.

It's always best to pay yourself via Payroll (even if you do it 3 times a week) and pay your owns bills from your personal checking account. When you start mixing it up, you become one and the same as your Corporation.

But don't assume that the Trustee is going to take your business or any of it's assets at this time, go visit several attorney's and see what they have to say. Every case, every Trustee, every district is different.

One thing is for sure, if you file a Chapter 7, the business records will be examined, and scrutinized by both Trustee's, including the businesses tax returns for the last 5 years. If you file a Chapter 13, they will probably ask some questions about your businesses, but will likely leave them alone and simply ask for Profit & Loss Statements.

Good luck and let us know how you do! I'll be hoping for the best for you!

[JusticeForAll]

UGH! That's horrible kcj -- I can't imagine having to buy back a business I worked so hard for!

But I guess it beats the alternative, huh?

Glad you were able to save your business!

Old law Ch7 case here. We had to buy back our business from the trustee - he is taking the amount that we had in A/R on the date we filed. We don't have any inventory or assets (save one laptop that is needed for field work).

Just be honest with the trustee, and try to get a clean record of what happened, even if that means making an excel sheet showing what was comingled between business and personal.

[whitekr]

Thanks for the advice. I have learned that and become better about it over the years. When I first staretd the business, I also had a job and just used the business as "play money". Then when I quit my job, I did just start paying myself a regular salary, but would also sometimes use the business $$ for some big home repairs. I think the biggest problem is my profit has dropped dramtically over the past year or so, but I have been "paying " myself the same amount to keep up with the bills, so it has all caught up in credit cards and persoanl loans.

[kcj]

Buying it back was the much better alternative. Considering my DH and his brother are the only employees, it would have sucked to leave the two of them without jobs.