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In a Chapter 7, can I keep my business open provided all my "tools of the trade" are exempt?

San Francisco, CA |

Wondering if the bankruptcy court will close the business when I file. Everything I have is within the exemptions. My business rent is paid up and I don't owe any suppliers. Mostly credit card debt. The business is picking up but not enough to cover the credit card payments.

Attorney Answers 5


It will be up to the bankruptcy trustee (assuming you're considering chapter 7). As log as your business is fully insured, if its sale value does not exceed your exemption claim, then it's definitely possible to file and keep the business operating. It's ultimately a decision of the trustee though and each jurisdiction is different, so to get a more detailed answer you should speak to a local bankruptcy attorney.

Nothing contained in this message should be construed as legal advice.

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If your business is a sole proprietorship and also has a "storefront" so the public can come in, you would be at risk of having the trustee shut it down during the duration of your Chapter 7. If you don't want to take that risk, then you should either incorporate the business or file a Chapter 13. You should definitely consult with a qualified bankruptcy attorney in your area.

This reply does not constitute legal advice or establish an attorney-client relationship.

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More information is needed to give you useful advice. One thing is certain, the trustee will require full coverage liability insurance for the reason that the trustee technically has "ownership" of your non-exempt assets and is concerned that as an "owner" of your business for BK case administration purposes, theoretically he/she might be liable for certain events in the business, a customer's injury on the business premises, for example. I don't think your exempting "tools of the trade" makes a difference on the trustee's view. Be sure to consult with a local BK atty in your area. Good luck.

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If you have a business that collects sales tax, the trustee will be worried about you having continued liability for payment of the sales tax. Other business issues could be vulnerable, so be sure to obtain representation from an attorney specializing in business bankruptcy cases so you get the protection from those knowing the tricks of our trade. Hope this perspective helps!

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As you can see from the prior answers, there is more information that is needed. Also, it depends on the trustee, and depends on many other factors rather than if you have just protected your business with exemptions and are current on the expenses for the business.

Yes, those are factors in protecting the assets. But the issue of shutting down the business (or even potentially selling the business) is an issue beyond whether or not the tools of the trade are protected. What type of business it is, do you have a store front, what is the value of the actual business. And on and on.

You really should higher competent counsel if you are filing bankruptcy, and especially if you are filing bankruptcy if you own a business.

There are to many issues and to many questions to truly answer your question in even a mildly helpful or on target manner for your particular case.

You should consult an attorney for advice regarding your individual situation. Nothing in this response nor any communication shall be deemed to be a guarantee, warranty or prediction of the outcome of any case. This communication does not create an attorney-client relationship nor does it create an attorney-client privilege. Susan Dodds only practices in California. You should consult with an attorney immediately that is familiar with cases in your area. We are a debt relief agency, we help people file for bankruptcy under the bankruptcy code.

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