It is one thing to get in over your head while you have a stint of unemployment or under-employment, a medical issue, or a ugly divorce. Once the condition that created the need for bankruptcy passes, the bankruptcy case can be pretty straight forward. Once you add a debtor who is self employed or owns a small business of some sort, you have a whole new set of issues.
One of the first questions is, who owns the property or assets; the company or the debtor. I discussed this issue in Bankruptcy - who is the debtor? what is protected?
 |
Image courtesy of imagerymajestic at
FreeDigitalPhotos.net |
Another question is income and bookkeeping. Unless a debtor issues himself or herself a regular paycheck, his or her income will generally be measured by the gross proceeds of the business less actual business expenses. Accurate bookkeeping is essential to establish a debtor's/business owner's income.
Also remember the company is probably an asset. How much is it worth? Does it have inventory, accounts receivable, assignable contracts, or equipment? Is it an interest that can be sold to another business owner? Most times an interest is a small business has little or no value because the debtor is the business; however, the value of business needs to be considered.
Is the debtor planning to continue the business or has it ceased operation? If the debtor is planning to continue operating the business, he or she will have to plan to operate without credit for some time. If the owner is using credit at the time this process starts, a plan to move the business off credit needs to be discussed.
What about complaints from customers and vendors? Usually, these complaints and debts can be discharged as long as the debtor did not commit fraud. Bookkeeping and records management become even more important under these circumstances.
If customers and/or complaint to the US Trustee, the trustee's litigation branch may conduct a more thorough examination of the case than otherwise conducted. Then, a certification to a list of income and expenses may not be enough. The trustee's office may request bank records, receipts, credit card statements and other business record. Assuming these documents support the bankruptcy schedules and no evidence of fraud exist. the debtor should receive a discharge. Record keeping is key.
These are some of the issues for self employed and small business owners. Added considerations should be made in preparing a bankruptcy case.
If you want assistance, legal representation, or just want to know more about Mark Medvesky or our firm of Wells, Hoffman, Holloway & Medvesky LLP, check out our website at www.whhmlaw.com.
#bankruptcy #Chapter7 #Chapter13 #MontgomeryCounty #lawfirm #BucksCounty #Pennsylvania
