In certain circumstances, if a business owner in California files for bankruptcy, they could end up losing business assets. It all depends on which type of bankruptcy they file, the structure of their business, and the value of their business assets. When you work with The Law Offices of Paul Y. Lee on your California bankruptcy, you can count on us to find the best option for you.
You Must Disclose Your Business Assets if You File for Bankruptcy in California
Anyone who files for bankruptcy in California is required to list all their assets and all their income. This is true whether Chapter 7 or Chapter 13 is filed. This will all be public information so be sure that you work with your bankruptcy attorney to accurately list and value all your business’ assets, including vehicles, shares, stocks, equipment, etc.
How Chapter 7 Bankruptcy Could Affect Your Business Assets
If you filed Chapter 7 bankruptcy (which is the most common type of bankruptcy), any asset you own would become part of the bankruptcy estate – unless you are able to exempt your assets. If not, then a court-appointed trustee has the right to sell your property and distribute the proceeds to any creditors you have.
However, before the trustee decides to do this to your business assets, they will look at how much it would cost to dissolve and sell your business. If it does not make financial sense for them to do so then they will not. It will generally depend on whether or not many (or all) business assets are exempt, the business structure, and what your other assets are.
How Chapter 13 Bankruptcy Could Affect Your Business Assets
This option restructures your debt, which means that you will pay the debt back and that some of it might be eliminated. This type of bankruptcy does not require you to liquidate assets, but you must have a three to five-year payment plan. Any nonexempt business assets you have will be part of the decision made as to how much you can pay.
Your Business Structure Affects Your Business Assets
The way your business is structured will make a difference too. If you are a sole proprietor, then a trustee could suspend your operation until they can determine the value, exemptions, and potential sales price of your company. If you are part of a partnership or LLC, then only your portion of the business can become part of the bankruptcy.
These are just a few of the examples of business structures. To find out how your specific assets might be affected, contact The Law Offices of Paul Y. Lee at 888-748-0025 to request a free consultation. We can go over your options and help you determine the best way forward.