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socrateaser
socrateaser, Attorney
Category: Bankruptcy Law
Satisfied Customers: 34369
Experience:  Attorney and Real Estate Broker -- Retired (mostly)
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A few BK questions: 1. To file personal BK, do I need to

Customer Question

A few BK questions:

1. To file personal BK, do I need to have all tax returns filed and up to date?

2. In filing personal BK, will I be asked to provide books and records of any business entities I control? Will the BK be dismissed if the books and records of those entities are not in order?

3. Is there a way to file BK and keep the automatic stay open for a long time, even if I don't have last year's taxes filed yet?
Submitted: 2 years ago.
Category: Bankruptcy Law
Expert:  socrateaser replied 2 years ago.
1. To file personal BK, do I need to have all tax returns filed and up to date?

A: No, but unless you do, you won't know which tax years you can discharge.

2. In filing personal BK, will I be asked to provide books and records of any business entities I control? Will the BK be dismissed if the books and records of those entities are not in order?

A: The trustee will need to value the businesses. This will require accurate financials.

3. Is there a way to file BK and keep the automatic stay open for a long time, even if I don't have last year's taxes filed yet?

A: The automatic stay remains in force until the case is either discharged or dismissed. So, unless the trustee gets tired of waiting for you to provide all of the tax returns, then the stay will remain in force and the case will remain open awaiting discharge.

Hope this helps.

NOTICE: My goal here is to entertain while educating the public about the law. I hope my answer is useful and informative to you. During our conversation, the website may ask you to rate my answer. If you rate my answer lower than the middle rating, then the website retains your entire payment, and I receive nothing. It is entirely your choice as to how you rate my answer. However, because your payment to me is in the nature of a donation/gift, rather than as compensation for any services rendered, you are entitled to know how your rating affects the final distribution of your donation.

If you need to contact me again, please put my user id at the beginning of your question ("To Socrateaser"), and the system will send me an alert. Please Click the following link for IMPORTANT LEGAL INFORMATION. Thanks and best wishes!

Customer: replied 2 years ago.
To Socrateaser


Regarding personal bankruptcy, how detailed or extensive do the valuations of my business entities have to be? Does a simple quickbooks printout of assets and liabilities suffice? Bank statements for each entity? What is required?


Also, if the documents provided to the trustee are not good enough, how long do you think the typical trustee will allow to prepare or improve those business valuation documents, before dismissing the BK?


Last question and very important. Does the personal (chapter 7) bankruptcy filing have the effect of "staying" current civil litigation, or have you ever seen a chapter 7 BK filing (or discharge) actually result in the dismissal of civil litigation? The civil litigation is a patent infringement lawsuit currently pending against me in district court, California.


Note: I reside in, and am a resident of, Arizona.
Expert:  socrateaser replied 2 years ago.
Regarding personal bankruptcy, how detailed or extensive do the valuations of my business entities have to be? Does a simple quickbooks printout of assets and liabilities suffice? Bank statements for each entity? What is required?

A: It's up to the bankruptcy trustee. There is no specific requirement other than to cooperate with the trustee (cf., failure to file four years of tax returns is grounds for case dismissal or conversion to Chapter 13).

Your ownership interest in each entity becomes the property of the bankruptcy estate, and the trustee is charged with the obligation to administer/liquidate those assets to pay your unsecured creditors. If you are the sole owner of the business, then the trustee can obtain an independent accounting of the business, at the estate's cost, assuming it can pay for it -- if not, then the trustee may accept your unaudied financial statements and tax returns.

The real issue in the trustee's mind is an inventory of the physical and intangible assets of the business and provable liabilities, because the trustee is required to liquidate all of your ownership interests, or abandon them back to you at the end of the case. If the trustee thinks he/she can find a buyer, then he/she will sell your interest for whatever he/she can get. If not, then the trustee will abandon ownership back to you.

Also, if the documents provided to the trustee are not good enough, how long do you think the typical trustee will allow to prepare or improve those business valuation documents, before dismissing the BK?

A: Legally, if the trustee thinks an asset may appreciate in value, or is worth continuing in business until it can be sold, then the trustee can either run the business until he/she can find a buyer. You could be discharged from bankruptcy, but your businesses could continue to survive and run without you for an indefinite period of time. The typical trustee, however, is not interested in a protracted operation of debtor businesses. Inevitably, the trustee will either sell the business to someone for pennies on the dollar or abandon them to you, and then close the case.

Last question and very important. Does the personal (chapter 7) bankruptcy filing have the effect of "staying" current civil litigation, or have you ever seen a chapter 7 BK filing (or discharge) actually result in the dismissal of civil litigation? The civil litigation is a patent infringement lawsuit currently pending against me in district court, California.


A: All civil actions against the debtor are stayed. The creditor/plaintiff has the option of asking for a relief from stay so as to complete the litigation, or simply filing a proof of claim and then litigating any objection in bankruptcy court. Usually, the latter is far less costly for both plaintiff/creditor and defendant/debtor. The issue for the bankruptcy court is whether or not the issue is one that the court is comfortable or legally authorized to resolve (e.g., the bankruptcy court will not generally deal with probate or family law property division matters).

Regardless of any state court matter that the bankruptcy court permits to proceed to judgment, disposition of post judgment matters is subject to the bankruptcy court -- e.g., a state court judgment of a breach of contract is irrelevant, because the debt thereby created will be immediately discharged in bankruptcy court. A judgment of fraud, in contrast, would be given effect in bankruptcy court, assuming that the judgment creditor also files an adversary proceeding (bankruptcy court lawsuit) to determine the nondischargeability of the debt. And, the point here is that, this too, creates multiple litigations concerning the same issue -- so, it may be more cost effective for the creditor to simply file a proof of claim on the debt, and then file an adversary proceeding to determine dischargeability, without completing the state court action.

The bankruptcy could would have to consider the procedural status of the state court action. A case that is far from trial may be denied relief, because an adversary proceeding would be less costly for everyone. Whereas a case that was stayed after trial but prior to final judgment, may be permitted to complete, because there's nothing left to do other than obtain the court's judgment.

Hope this helps.

NOTICE: My goal here is to entertain while educating the public about the law. I hope my answer is useful and informative to you. During our conversation, the website may ask you to rate my answer. If you rate my answer lower than the middle rating, then the website retains your entire payment, and I receive nothing. It is entirely your choice as to how you rate my answer. However, because your payment to me is in the nature of a donation/gift, rather than as compensation for any services rendered, you are entitled to know how your rating affects the final distribution of your donation.

If you need to contact me again, please put my user id at the beginning of your question ("To Socrateaser"), and the system will send me an alert. Please Click the following link for IMPORTANT LEGAL INFORMATION. Thanks and best wishes!

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