If you are a business owner then continued operation of your business is essential to the livelihood of you and your family. You may need to file bankruptcy and get a fresh start, but if that means giving up your business then you may need to look at other options. For this reason, in bankruptcy businesses can be a sensitive subject. Frequently I speak with new clients who are operating a business and are worried about what will happen if they file just on their personal debt such as personal credit cards. They know that they need to file for their personal debt but don’t want to include their business, their livelihood, in their filing.
Can I File Bankruptcy In San Diego If I Have a Business?
The good news is that in most cases you can file bankruptcy in San Diego and keep your business. But this is not always the case. There are situations in which filing could be problematic. There are three common situations in which a business can be protected in bankruptcy and you can keep your business when you file bankruptcy.
First, if the net assets and goodwill are within your allowable exemptions (exemptions refer to property that you get to keep), then you can keep your business and its assets when you file a personal case. Since the assets, including goodwill, are covered by your exemptions, you get to keep the assets. They cannot be sold and used to pay your creditors.
Second, even if your business has substantial assets that exceed your applicable exemptions, such as substantial business equipment or a full liquor license, there may be liens, such as tax liens or UCC Financing Statements that encumber those assets. To the extent that the assets of your business are encumbered by liens, then the net value of the assets may be reduced to the point that the net value is covered by your allowable exemptions. Hence, the business will be protected when you file.
Third, for married couples, often upon further examination your lawyer may determine that the business is really the separate property of your spouse who is not filing or does not necessarily need to file. In other words, you may “have a business” but technically, under California community property law belongs to your spouse. If you file by yourself, you don't have to list your spouse's separate property. For example, your spouse may have owned or acquired the business prior to your marriage, or your spouse may have received the business as a gift or inheritance from a family member before or during your marriage. In such a case, the business would not be treated as an asset of your bankruptcy since your spouse's separate property assets are not included in your bankruptcy. Your lawyer will be able to tell you whether or not you have a community property or separate property ownership interest in your spouse's business.
Proper characterization of a business requires careful examination of the fact and legal analysis by an experienced attorney. Depending upon the facts of the case, you may have acquired a partial community property interest in the business and to the extent that you have a community property interest or your own separate property interest, that interest would be part of your bankruptcy.
If you have a business and need to file bankruptcy, talk to a San Diego bankruptcy attorney. Chances are that you will find, as many of our clients do, that you can file bankruptcy and keep your business and all of its assets, while eliminating all of your debt.
