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Elizabeth Prentice
Elizabeth Prentice, Attorney
Category: Bankruptcy Law
Satisfied Customers: 174
Experience:  Managing Attorney for one of the largest consumer bankruptcy firms in America.
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I own a franchise business, I am being audited by the franchisor

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I own a franchise business, I am being audited by the franchisor but I am undergoing a personal bankruptcy and I denied providing them with financial documentation, I am thinking about terminating the franchise but I am not sure of the legal ramifications,

Should I include the franchisor in the bankruptcy?
Can they sue me for unrealized royalties?
Can they prohibit that I continue in my line of business on my own?
Please help.
I am a bankruptcy attorney and i would be happy to assist you. When you file bankruptcy, you must declare ALL your assets and debts. Even if you plan to keep something, you are still required to list it. Your bankruptcy attorney should've informed you of this. If you fail to disclose anything, you can be found guilty of a federal crime and fraud. It is a very serious issue. However, forgetting to add something or filing your schedules improperly is ok as long as you correct the issue as soon as possible. Simply list the franchise debts you owe on an amended schedule D or F, depending on whether they are secured or not. you also must list any leases or contracts you have (ex-the franchise contract) on the Schedule which states whether you have any leases or contracts. You should also file an Amended Statement of Intention, stating whether you wish to keep the contracts or get rid of them. In bankruptcy, you have the ability to get out of a contract you normally wouldn't be able to and discharge the debts. However, you need to get this all filed asap. If you are confused about how to amend and file the forms, you should consult with your attorney or retain one as soon as possible to assist you.

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Customer: replied 3 years ago.
Relist: Incomplete answer.
My question was not answered completely.
See below

Should I include the franchisor in the bankruptcy?Can they sue me for unrealized royalties?Can they prohibit that I continue in my line of business on my own?Please help.
I am sorry if you did not understand my answer. before relisting it, feel free to ask questions for clarification. Yes, not only should you include the franchiser, you are required to list them in your bankruptcy. If you list them in your bankruptcy, you must list all debts you owe to them. If unrealized royalties are a debt you owe, they are either unsecured or secured or attached to a contract. You will have to decide whether you wish to reaffirm or not. If you reaffirm the royalties and franchise, then you will be liable for them. If you wish to relinquish the contract and thereby not reaffirm it, you will be able to discharge the debts. if there exists any equity, the trustee will have to assess whether it is exempt or unexempt and then obtain unexempt equity for the estate. As I previously mentioned, you should amend the schedules to include all of this as soon as possible.
One last thing, if you signed a contract which you are choosing to break in your bankruptcy, you should consult with an attorney regarding the ramifications. For example, although you may be able to walk away from the franchise and any related debts, you may still be bound by non-compete clauses. Further, creditors are forbidden from suing a debtor while a bankruptcy is pending. They may merely assert they are a creditor in your bankruptcy. they can not sue you while your bankruptcy is pending for any debts, and if you properly disclosed those debts in your bankruptcy and they are discharged, they can not sue you after either.

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