Bankruptcy

What Happens to my Little Business When I File a Personal Chapter 7 Bankruptcy in Arizona?

By Joseph McDaniel, Esq.

Have you noticed that things all happen in clusters, influenced apparently by sunspots?

I got three calls this month from folks who had filed pro-per emergency Chapter 11 cases. And yes, I referred all three out of the office. I want to know the end game before I file a Chapter 11.

But I've also talked to three nice folks who couldn't afford the entry ticket for a Chapter 11. They'll be filing garden variety Chapter 7 cases.

They all three (sunspots, remember?) have little businesses. And all three will very probably get to keep their micro-businesses (my frequent readers will recall that I won't guarantee that lava is hot, iphones are cool, or grass is green).

And why might they get to keep those businesses?

Well, first, because they listed them (or the stock in them) in their bankruptcy petitions.

That's not unusual.

And the businesses are stinkers; the corporations that enclose the little businesses are insolvent.

None of that is unusual.

Note that they may not get to keep the little businesses if their competitors want to buy them from the trustees in their cases.

But I'll talk to you more about this topic as time goes by.

Also note: an alternative for all three entrepreneurs is simply to start a new business after they file their bankruptcy.

New lease, new office furniture (which costs zip these days; office furniture is a drug on the market); the same client base if it's public record or they buy the customer list back from the Chapter 7 trustee. Same line of work.

For instance, if there's a pool cleaning corporation being operated by the owner of the business, that may be simple. After the business dies, the debtor files a bankruptcy, and then blanket advertises for pool services in the same zip code after his Chapter 7 is filed.

NOTE WELL: there are a lot of wrong ways to try to hang onto a small business after a bankruptcy filing.

The dumbest is to transfer stock to your boyfriend/girlfriend/father/brother for no consideration.

The second dumbest is to sell the stock to your boyfriend/girlfriend/father/brother for a dollar.

The third is simply not to list the stock. Dumb as a bag of hammers.

NOTHING HERE CONSTITUTES LEGAL ADVICE RE A CHAPTER 7, CHAPTER 13, CHAPTER 11, OR CHAPTER 12. FIND AN ARIZONA BANKRUPTCY LAWYER WHO IS BOARD CERTIFIED IN BANKRUPTCY LAW, AV RATED, AVVO 10 RATED, ON SUPERLAWYERS, OR JUST VERY EXPERIENCED AND A FORMER CHAIR OF SOME BANKRUPTCY SECTION OR COMMITTEE. NOTHING HERE MAY BE USED AS LEGAL ADVICE IN CONNECTION WITH ANY BANKRUPTCY, WHETHER THAT BANKRUPTCY IS IN PHOENIX, GLENDALE, TEMPE, MESA, SCOTTSDALE, OR ANYWHERE ELSE.

Full post as published by Arizona Bankruptcy Attorney Blog on June 16, 2009 (boomark / email).