Chapter 7 and Running a Business

[California]

I have a sole proprietorship (no employees), but my credit card debt is getting too high and I want to file for chapter 7 (my income is below medium).

I was wondering if I file for a Chapter 7 bankruptcy, will the court shut my business down or just let me keep the business? (there isnt any issue involving non-exempt assets)

[dogbone33]

I got to keep up and running.

[fireworks]

I had two businesses, a retail store and a small consulting business. My lawyer advised me that the retail store would have to go, because the court would want the assets (inventory, fixtures, etc). We had a big "going out of business" sale and got rid of all of that. The consulting business he said can stay because it has very little in the way of assets (a few computers and office furniture) that are wrapped up in "tools of trade" exemptions. We're filing Ch.7 as soon as I can get all of the paperwork in order.

What it comes down to is hard assets. If your business has anything of value that the trustee might be able to sell (vehicles, equipment, accounts receivable) then they'll want to take it. Get with your lawyer and see about your state's exemptions for those items to see what you can keep. Otherwise, if the business is something that would be worthless without you (as most very-small businesses are) then you're in the clear.

[diebroccoli]

I am going through this exact scenario at the moment. Well, havent filed yet, but my attorney and I are getting things in order prior to filing.

I have a retail business with about 100k in inventory and here is what i learned so far:
- If your debt is mostly (>50%) non consumer (i.e. used for your business), then there is no means test
- If your inventory would be liquidated for well below wholesale pricing, you may be able to work out a buy back plan. You would hand over your assets to the trustee, on paper, then work out a plan to pay monthly for the right to buy back your assets (inventory, equipment, etc).
- +1 on what fireworks said about the business needing you to have value. Note that this can apply to retail businesses as well. Could someone step in and run your business? If you run a subway, then yeah sure they could. If you run an ebay business, or something highly specialized, then probably not.

I am FAR from an expert and am still going through the process, but from what i understand the trustee just wants to recover as much as possible for your creditors. Get a good lawyer, preferably one who is familiar and maybe even personally knows the trustees in your area.