If I operate a business and I filed for Bankruptcy, am I required to stop business operation?
The answer depends on who is filing for bankruptcy.
If the bankruptcy filer is a corporation, limited liability company, or partnership, it must stop business operation immediately upon filing Chapter 7 Bankruptcy. Corporation, limited liability company, and partnership cannot use the California exemptions to prevent Chapter 7 Bankruptcy Trustee from liquidating business assets of value.
If the corporation, limited liability company, or partnership wants to continue business operation and restructured their debts, they should consider a Chapter 11 Bankruptcy, which can be very expensive. Unfortunately, corporation, limited liability company, or partnership cannot file for Chapter 13 Bankruptcy.
If the bankruptcy filer is a person operating under a sole proprietorship, he or she can continue business operation unless the Chapter 7 Bankruptcy Trustee says otherwise. If the business assets are exempted by the California exemption and or encumbered by liens so that they the business assets are immaterial in value, the Chapter 7 Bankruptcy Trustee would not liquidate the business assets. The Chapter 7 Bankruptcy Trustee is more likely to allow debtor’s to continue business operation if you maintain all business insurance so that the Chapter 7 Bankruptcy Trustee will not be held liable if a third party is injured on business premises or by debtor’s business activities. Muoi Chea, an experienced Sacramento Bankruptcy Attorney can advise you before you file for Bankruptcy.
If the sole proprietor is concerned about materail business assets that are valued in excess of the California exemption and the lien balance and want to continue business operation by restructuring his or her business and or personal debts, the debtor should consider Chapter 13 Bankruptcy. Under Chapter 13 Bankruptcy, the sole proprietor does not have to worry about the Chapter 13 Bankruptcy Trustee liquidating his or her assets. Instead, the debtor will repay creditors under a 36 to 60 months payment plan. This doe NOT mean that debtor has to repay 100% of the business and or personal debts. You can end up paying as little as 1% of your business and personal debts. How much you must repay in a Chapter 13 Bankruptcy depends on your income, reasonable and necessary expenses, and assets. Muoi Chea Sacramento Bankruptcy Attorney can calculate your total Chapter 13 Bankruptcy plan payment over the phone. Muoi Chea Bankruptcy Attorney has offices in Sacramento, Stockton, and Fairfield, California to serve all of Northern and Central California residents in financial distress.