QUESTION
Will the creditors go after the people I sell my business to?
Asked on Apr 14th, 2015 on Bankruptcy - Michigan
More details to this question:
I am a sole proprietor of a small business but I am planning on filing for bankruptcy due to business and personal credit problems. I am planning on either selling or gifting my business to a family member. Will the creditors still go after the business after it’s been given away?
10 ANSWERS
Debt Settlement Attorney serving San Diego, CA
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Law Offices of Kathryn Tokarska
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Do NOT transfer, sell, give away any property before you discuss your situation with an attorney. You need LEGAL advise, not some Q&A type of a thing over the internet. Get a face to face consult with an attorney. I don't say this unless I think it's absolutely necessary. Just so you know, generally speaking, Trustees can and do recover assets even if they have to sue to do it.
Answered on Apr 16th, 2015 at 9:16 AM
Bad move! Forget your creditors - the Chapter 7 Trustee will go after your business assets. This is not a time to skimp on money. Pay an experienced Bk lawyer for an hour of their time so you can do things right. Good luck!
Answered on Apr 15th, 2015 at 6:37 PM
Deborah F. Bowinski
Anything you give away will be recovered by your bankruptcy trustee. If you choose to sell your business, make sure you sell it for a fair market value. Your best option will be to seek legal counsel before taking any action at all. Some actions can make a bad situation worse rather than better.
Answered on Apr 15th, 2015 at 6:32 PM
Commercial & Bankruptcy Law Attorney serving Powell, OH
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Ronald K. Nims
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If the business has assets - inventory, fixtures, machines, vehicles, accounts receivable etc - your creditors will be able to go after the new owner if you sell it. If you make a gift of the business, your creditors will be able to go after the new owner regardless of the nature of the business. Gifting a business is a bad idea if you're considering bankruptcy.
Answered on Apr 14th, 2015 at 7:00 PM
Debt Settlement Attorney serving Chicago, IL
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Law Offices of Daniel J. Winter
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Yes the creditors and the trustee in bankruptcy can possibly pursue the business if you try to transfer it. Call a lawyer before doing anything.
Answered on Apr 14th, 2015 at 6:59 PM
Bankruptcy Attorney serving Madison, WI
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Richard B. Jacobson & Associates, LLC
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In many states, there are limits on 'successor liability.' Many debts do not stick with the business. They are likely to do so if the creditor has a security interest in any of the equipment or inventory. Sometimes statutes may apply some obligations of the old business to the new one in particular some kinds of unpaid taxes. Both you and your prospective buyer should contact experienced lawyers (not the same one for both of you) who can review all the facts and details and advise you.
Answered on Apr 14th, 2015 at 2:49 PM
Even if the creditors do not go after your business assets, you can be charged as a criminal for giving away assets. The Uniform Fraudulent Transfers Act should be on your list of things to read. When you go into bankruptcy court, your bankruptcy trustee will pursue the people you gifted theses assets to. If you sell these assets for below fair market value instead of just giving them away, you are inviting your family member to be the victim of an expensive lawsuit. Some people will accept legal advice, others have to learn the hard way. What kind of person do you want to be?
Answered on Apr 14th, 2015 at 2:48 PM
Transfers such as what you are proposing are illegal in BK.
Answered on Apr 14th, 2015 at 2:16 PM
Transfers of assets to family members are subject to very strict scrutiny in a bankruptcy case, so the sale of your business must approximate an arms-length transaction or it could be undone by the bankruptcy trustee. The test is whether the trustee could have liquidated your business for more money than you obtained by selling it. You would be better off just shutting it down before filing bankruptcy and leaving it up to the trustee what to do with the assets. That would give you the opportunity to make a business case for the transfer to a family member without risking an accusation of a fraudulent transfer. You would have an opportunity to make the trustee your ally instead of your adversary.
Answered on Apr 14th, 2015 at 1:38 PM
Appellate Attorney serving Grosse Pointe Farms, MI
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Musilli Brennan Associates, PLLC
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You need a lot of legal counsel. The answer is your creditors will come after everything and anyone which might be liable and collectable.
Answered on Apr 14th, 2015 at 12:31 PM