Potential issue due to former business?

[onthebrink]

I am in the process of preparing to file for Ch 7. I met with a BK attorney last week. She is going to send over some forms we need to fill out for her to determine the complexity and optimal filing date of our case. On the surface, she said that we should pass based on the median income test when we file and be a "no asset" case.

After I met her, I read about the Statement of Financial Affairs in Nolo's "How to File Ch 7 BK" book and got scared s***less when I read about the need to state the names of businesses where one has been an officer. I started a company (c-corp) five years ago and received investor funding. Last year, we were not able to obtain additional funding and had to close the company. I along with the 3 other employees were let go and the investors dissolved the company. I have been on unemployment since then.

One of my concerns is that my involvement with the business will make my case overly complex and trigger a delay or a "totality of circumstances" test. The company is closed and has no assets and neither do I. I'm already frightened about the whole BK process and fearful that our petition to file personal Ch 7 will be denied. I am unemployed and it is difficult to predict on how successful I will be in either securing full-time employment or consulting project income in a timely and ongoing manner.

In addition to being concerned about potential additional complexity and the possible hassle of having to obtain and submit financial statements for the company, I don't want other people that were involved with the company, specifically previous investors and employees, to find out about my filing BK. I am only telling my closest friends (who are in the same situation) and family about our plan to file.

My question is, do you think my concerns are justified? Will this raise red flags for the TT? Will my former investors and company accountant and bookkeeper be brought into this?

Thank you - I have learned so much from this site and it's good to know I am not alone.

[lrprn]

I am in the process of preparing to file for Ch 7. I met with a BK attorney last week.

If you didn't meet with 2-3 other bk attorneys along with this one, it's a good idea to do so. You may end up going with this one, but you also could find one who could be even better.

If you've already retained this one, then let's hope she's experienced filing bankruptcies in your local court and knows the trustees' habits and customs well.

The company is closed and has no assets and neither do I.

This is why this is a non-issue for your filing. You list the company on your filing forms where appropriate, indicate that it is no longer active, and that it has no assets. Your trustee can't get anything from nothing.

I don't want other people that were involved with the company, specifically previous investors and employees, to find out about my filing BK. I am only telling my closest friends (who are in the same situation) and family about our plan to file.

Many of us here very much understand your wish to keep the news of your filing from anyone you don't tell yourself. However, you need to keep in mind that filing bankruptcy is public information. For example, many local newspapers list all the filed bankruptcies in the local court every week right alongside the marriages and divorces - ours does.

In this situation, it's best to keep your eye on the prize. Avoiding embarrassment and saving face seems very important, but your family's financial and mental health is very important too. Which is your priority?

My question is, do you think my concerns are justified? Will this raise red flags for the TT? Will my former investors and company accountant and bookkeeper be brought into this?

Because your business closed within the last year, it's likely it will have to be mentioned as a part of your filing. However, it shouldn't raise a red flag for your trustee. Also because the business is closed and has been for at least a few months now, there's no board or owners to notify about your filing.

Millions of businesses have failed over the last few years - yours is just one on a long list for your trustee. As long as you or the partners didn't transfer assets to hide them from the court or do any other legal shenanigans that could make it appear you are committing bk fraud (like having the business continue under a new name that you don't disclose in your filing), you'll be fine.

Talk this situation over with your lawyer or during the additional interviews if you decide on those. I'm pretty sure you'll feel much less stressed about it once you do.

[Dst1]

You need an attorney that specalizes in dealing with small business BK as well as personal BKs. There *could* be a whole host of issues that can crop up in this situation. This can be a very easy process or a very convoluted one. The most important thing is to find an attorney that has expereince dealing with small business and their nexus to personal BKs; not every BK attorney has this expereince.

[onthebrink]

Thank you both. Our attorney does specialize in both small business and personal bankruptcies and seems to be knowledgeable about the local TT's customs and attitudes.