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cfortunato
cfortunato, Attorney
Category: Bankruptcy Law
Satisfied Customers: 8023
Experience:  Bankruptcy professor.
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Dear cfortunato, Im liquidating a retail store and will

Resolved Question:

Dear cfortunato,

I’m liquidating a retail store and will file for CH. 7 B.K. shortly after its close (sole proprietor.)
Between now and then, I want to start a cleaning business using my current truck (truck’s KBB value is only about $900 over the current payoff amount) and will purchase about $2K worth of cleaning equipment. The new service business is a different industry than I'm in now, and I will have a different DBA.
Should I form it as some type of corporation, to protect it from my BK?
Submitted: 2 years ago.
Category: Bankruptcy Law
Expert:  cfortunato replied 2 years ago.

HiCustomer

I think you may not know how JustAnswer.com works, as you have not "accepted" or provided a rating for the previous 2 questions that I answered for you.

Please go back and provide ratings for those questions before continuing with another question.

Thank you.

Customer: replied 2 years ago.


Done, sorry about that....

Expert:  cfortunato replied 2 years ago.

Thank you!

 

The form of your new business will not protect it from the Bankruptcy estate. In other words, whatever your business owns will be imputed to you, regardless of whether the business is a corporation or a sole proprietorship.

However, if your business has only around $3,000 worth of assets, you will be to keep those, as that amount is well below the applicable exemption.

 

I think this is what you wanted to know. If not, please let me know.

Thank you.

Customer: replied 2 years ago.

Let me be more specific: I have one secured creditor (cash advance from credit card sales) that is secured (filed UCC) and I have $2K in value in the new business when I file BK will it still be exempt? In other words, Old business is closed, some cash from the liquidation, new business has $2K in tools.


 


Thank you!


 


 

Expert:  cfortunato replied 2 years ago.

The total available exemption (protection) for your business will depend on whether you would have to use the homestead exemption to protect your home, and how much of the exemption you would have to use. Please answer the following:

1) Do you own a home?

2) If yes, what is the current market value of your home?

3) If yes, what is the balance on the mortgage(s)?

Customer: replied 2 years ago.


1) no 2).. 3).. Thanks!

Expert:  cfortunato replied 2 years ago.

Thank you for your response.

 

Since you do not have to use the homestead exemption, the applicable exemptions are $2,200 for "tools of the trade" - which would be your business equipment, in addition to a $23,250 "wildcard" exemption - which can be used for any and all other property, including the amount over $2,200 that your business owns.

So, you would be able to keep your business' assets if you file a Bankruptcy. It does not matter that the money for those assets came from the liquidation of your previous business.

cfortunato, Attorney
Category: Bankruptcy Law
Satisfied Customers: 8023
Experience: Bankruptcy professor.
cfortunato and 4 other Bankruptcy Law Specialists are ready to help you

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