In connection with a personal bankruptcy, a person’s business and/or the business assets are considered an asset of the individual. However, only the individual debtor’s ownership interest in the business and assets are the debtor’s asset.
In a chapter 7, if the individuals’ business interest has substantial value, in excess of its bankruptcy exemptions, the trustee can sell the business and disburse the proceeds to the creditors. Also, if the debtor’s interest in the business assets is substantial and in excess of his exemptions, the chapter 7 trustee may be permitted to sell the assets. If the value of the business and business’ assets are insignificant, the chapter 7 trustee will not sell the business or business assets. The value of the business and its assets are based on the value as of the time of the bankruptcy filing.
In a chapter 13 personal bankruptcy filing, the debtor’s business and business assets are considered assets, the same as in a chapter 13. However, in a chapter 13, the trustee will not sell the business and/or its assets. However, in the event that the personal debtor’s business interest and/or interest in assets is substantial, and in excess of exemptions, the debtor will be required to pay additional funds to the unsecured creditors. The amount that is paid to the unsecured creditors in a chapter 13 may not be less than the amount that a chapter 7 trustee would have received, if the same debtor had filed a chapter 7. If the value of the business and business’ assets are insignificant, the amount paid to unsecured creditors, if any, through a chapter 13, will not be effected.
If you wish to obtain information as to how a business can impact a personal bankruptcy, please contact New Jersey bankruptcy lawyer Robert Manchel at 1-866-503-5655.