Filing Chapter 7 Bankruptcy in Brooklyn when you have a small business

Many of my New York City clients have a common question:  Can I file for Chapter 7 Bankruptcy in Brooklyn, Manhattan, etc., if I own a small business.  The answers, with some caveats as always, is yes.

If you own a small business, the Trustee will likely ask you for tax returns for the last few years the business filed, as well as 6 months to one years worth of bank statements.

The first thing you need to ask yourself is:  Does the business have any assets that can be liquidated to pay creditors.  Most individuals do not.  You have an office and a few computers, but you likely dont have 20k servers or John Deere machines.  In that case the Trustee wont care at all about the business and likely wont liquidate a thing.  However, keep the type of business you run in mind.  If you have a dry cleaning business, youre likely to have a bunch of materials that can be sold for some money.  Same goes for a grocery store or a hardware store.  Real estate business is more unlikely (unless you have a considerable amount of comissions going in.)

The Chapter 7 Trustee in Brooklyn or wherever will also want to know how much the business has in the operating account.  Remember, unlike personal bankruptcy itself, listing your business in a Chapter 7 personal Bankruptcy doesnt come with any exmeptions.  If you have 10k in your business account, you cant protect a cent of it (unless its spoken for by other creditors or its their money.)  Keep that in mind.

Also look out for incoming monies.  Just because your business is flat broke now doesnt mean the Trustee wont ask about monies coming in.  If for instance you’re a commission based business, and you have $100 in the bank, but a 20k commission coming in, the Trustee is going to ask about it and want it, so be sure to be cognizant of that before you go see a Bankruptcy Attorney in Brooklyn.

Finally the Trustee will ask if you have partners in the business, as the Trustee cant technically touch the partners share.  If the assets in the business are worth 20k but you have three other partners, the Trustee might not touch the assets given the headaches that would come with it.

The bottom line is dont get scared about filing personal Chapter 7 Bankruptcy in New York City if you own a business.  Just make sure to speak to us about it before you file so that we can guide you about the proper way to file.