Small Business Assets and CHP. 7??

[repsol67]

We are in the process of trying to qualify for the means test on chp. 7. (we are very close according to our attorney). Our small business is stagnant at best and we are in to credit card debt about $100,000, both personal and business. Mostly business debt.

We do have a running, working website and a pretty decent name in our industry. Sales have been next to nothing in the past year, and we haven't had a profit at all for a few years. The few business consultants I talked to advised fire-sale of everything business related and basically told us the business was not worth much to anyone. Inventory is probably worth less than $30,000. We stopped paying insurance months ago and stopped paying creditors as well.

My question is regarding the business (sole prop.), and what will happen with the business assets and name and website if we go through chp.7? We still owe some money to the original owner that carried a note. The business doesn't have any employees, no overhead, not many bills unless it is to be kept running, (we are doubtful about this). What is the most likely scenario regarding the business and assets? The main reason I ask is that it would chap me to hand back the business and anything of value to the previous owner because they are partly responsible for the demise of the business. I know it may be an ego thing, but if anyone can shed light on what may go down and what options if any I have to keep the previous owner from profiting even one penny. I know....I am very bitter!

[HHM]

Did the previous owner file a UCC-1 with your security of state. A UCC-1 is how a business creditor takes a security interest in a business's assets. If yes, then regardless of the BK-7, any assets go back to that creditors. If no, then it is up to the BK Trustee. Whether the trustee wants to do anything with it depends on the nature of the business assets and whether they can be sold for very little cost to the trustee. Non tangible property, like web address, etc, trustees don't care because it is too much hassle to try to sell them. What is likely to happen is the trustee will "abandon" the property. Meaning, it goes back to you (in a legal sense) after your BK is discharged.

[fireworks]

I asked two different bankruptcy attorneys about this, they both advised me to fire-sale everything the business owned. Any asset that remains when you file will go the the bankruptcy estate. They both said what HHM said, that any intangible assets will not interest the trustee as they're practically worthless to anyone but you. Assets like accounts receivable, inventory, fixtures etc will be taken and sold. Following their advice, I sold all business assets and used the money to live on until I found a job.

[GWBcasualty]

Assets like accounts receivable, inventory, fixtures etc will be taken and sold.

That is true on two conditions:
1) That the goods are actually sellable... in other words, if your inventory is $30,000 in retail value of (say) iPods than it would be quickly sellable for a sizable sum even if sold at a distressed value. If your $30k inventory is of music boxes based on the Wizard of Oz... well, the trustee will probably leave everything to you. Got the idea? If you had no sales recently, I doubt that the trustee will be interested in your goods.

2) That you cannot exempt them. For example if you have a wild card exemption, you can value your inventory at close-out sale prices and exempt it.

[repsol67]

Ucc

I believe the previous owner did file a UCC, for some insane reason I remember this. I guess they knew something? Anyway, thanks for the responses. It would be nice to be able to keep what everyone tells me is worth nothing since I know it does have some value.

As far as the inventory being easy to sell....I guess that depends on the economy. we are not getting much in sales currently, but we did get some hits on items we heavily discounted. I am hoping the trustee doesn't want to have anything to do with the inventory and assets, but I know that if the previous owner is able to get into the trustee's ear and convince them of some value then the business would go to them. I would rather see everything go to a landfill.