Business

Attorney Explains How A Person With Business And Personal Debt Is Handled In A New Jersey Bankruptcy Case.

As I explained in my other blogs, two people who owe a joint debt, in New Jersey, both owe 100% of the debt. This means that the creditor may sue each person for the entire debt, or any percentage of the debt. By way of example, a creditor may receive 80% from one co-debtor and 20% from another, or 40% from one co-debtor and 60% from the other. Obviously, the creditor may not obtain more than the total amount due on the debt.
A corporation “Corp” and limited liability company “LLC” are separate and distinct entities. For the purposes of this blog a corporation “Corp” and limited liability company “LLC” are synonymous and both will be referred to as a “Corp”.  A “Corp” has similar characteristics of a person, regarding many creditor and debtor legal issues. The same explanation in paragraph one above applies to a “Corp” that owes a joint debt with a person. In other words, a creditor of a joint debt, with a person and “Corp”, may sue the person for the entire debt and/or the “Corp” for the entire debt. Additionally, in this scenario, the creditor may sue the person and/or “Corp” in any percentage for the outstanding debt.
A person that is operating her business, that is not designated as a “Corp” is treated as personal debt and not as separate debt. For example, the debt due to a business, such as John Doe’s Lawn Service, that did not establish a  “Corp with the state, is a debt that is owed solely by the personal owner and not the business.
In New Jersey, a “Corp” may file a chapter 7 to liquidate the business or a chapter 11 to reorganize the business. However, a “Corp” cannot file a chapter 13 to reorganize. A person can file a chapter 7 to liquidate and a chapter 13 to reorganize. Additionally, a person is also permitted to reorganize through a chapter 11. However, typically, a person would only file a chapter 11, unless the debt is substantial, Typically, chapter 11 filing fees and attorney’s fees are considerable.
If a person owns a business that is not related to a corporation, the person may resolve all business and personal debt through a single bankruptcy filing. Under this scenario, a person may file a chapter 13 or 11 to reorganize the business and personal debt, or a chapter 7 to liquidate the business and personal debt. If a person owes joint debt with a “Corp”, the “Corp” and person must file separate bankruptcy cases to resolve each of their respective debts.
You may contact Robert Manchel, at 866 503 5644, for a free bankruptcy consultation.

Typically, everyone that files a personal, individual, bankruptcy in New Jersey, who owns a small business, may keep their business. The bankruptcy laws analyze a business as an asset of the debtor. The debtor can keep any asset in a chapter 7 that does not have a substantial value. If the business is a corporation or limited liability company, the debtor’s interest in the asset (business) is based on his percentage of ownership in the company. Therefore, if the debtor owes 50% of the company and the company has a value of $5,000.00, than the debtor’s interest is $2,500.00.
Most small businesses do not have a substantial sale’s value, as the value is based on the reputation of the owner, who will likely not continue his association with the business after the sale. Larger businesses may require a forensic accountant to determine the sales’ value. The value of a business includes a number of factors, such as the value of the business’ assets, income, expenses, and debt. A corporation that owns a valuable property, with no mortgage may have a substantial value.
Although extremely unusual, a New Jersey bankruptcy trustee has the power to operate a business for a certain period, if the operation will benefit the bankruptcy estate and creditors. In general, a person filing a chapter 7 does not own a thriving and valuable business.
A chapter 13 bankruptcy trustee will never sell a personal, individual, debtor’s business. However, if a business has a substantial value, the debtor may be required to pay more money to the creditors in a chapter 13.
Robert Manchel, is a bankruptcy lawyer in New Jersey, who may be contacted at 866 535 5655.

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.