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Will personal bankruptcy affect my small s-corp business if I stay in good business standings and franchise within 6 months?

Long Beach, CA |

I own a small S-corp business that earns enough income to cover the bills and pay staff. There is barely anything left to pay me an income during these difficult economic times. However, I am seeing some sales growth each month BUT I do not, and have not for sometime, make enough income to pay my monthly personal bills and accumulated credit card debt. My dilema is I may have an opportunity to franchise my concept with an interested party over the next few months. If I file chapter 7 now so that I can make ends meet, how will my personal bankruptcy affect my small business venture as I try to franchise my concept? Or will it?

Attorney Answers 2


If you file a Chapter 7 bankruptcy all of your assest, except those that are exempt, including your shares in your S corp can be liquidated by the Trustee to pay your creditors. If you try to franchise your business you will need to disclose that you have filed a personal bankruptcy. If you can franchise your business in the next few months you should avoid filing a Chapter 7 bankruptcy. Your Chapter 7 bankruptcy will not be resoved in a few months. It will be very difficult for you to franchise your business when you are involved in a personal bankruptcy. Your may want to consult with your interested party. If he is interested in helping you franchise your business or if he is interested in acquiring a franchise he may be willing to provide you with some short term financial help until you can franchise your business. You may also want to contact your credit card companies. They may be willing to reduce your interest rate or lower your monthly payments

Good Luck

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Before you file any type of bankruptcy, you should consult with a franchise attorney. Perhaps the person who is interested in your concept (as a franchise) can loan you some funds to tide you over. If the underlying business model is strong and at the break even point, you should do whatever it takes to hang in there.

Good luck!

Kevin B. Murphy, B.S.B.A., M.B.A., J.D.
Mr. Franchise

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