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#Small Business #Bankruptcy: Should You #File Bankruptcy on Your Business? - YouTube
Channel: Saedi Law Group, LLC
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So what do you do if your small business
is failing and you realize that you're
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going to have to shut the doors but
you've got creditors coming after your
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business? Do you file bankruptcy on the
business? Watch our next video and find
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out!
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So I probably get this question at least
two or three times a week someone will
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call in and they will announce to me
that they need to file a business
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bankruptcy so whenever I hear this my
radar goes up real quick because
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probably 99.9% of the time you know they
don't really need to file a business
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bankruptcy they probably need to file a
personal bankruptcy because they've
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personally guaranteed probably their
business least credit cards maybe a
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business loan so they're definitely
probably looking at a personal
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bankruptcy but most of the time it
doesn't make sense to file a business
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chapter 7 bankruptcy and here's why a
business does not receive a discharge of
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their debt like a person the whole point
of doing a business chapter 7 bankruptcy
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is simply to allow a trustee to step in
liquidate whatever assets that business
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has and make a distribution to the
creditors so if you have a business that
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has made me a lot of inventory equipment
whatnot it really may make sense for you
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to do a chapter 7 bankruptcy just to
allow a nice winddown of the business so
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a chapter 7 trustee would step in they
would auction your equipment your
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inventory even intellectual property if
there was value to it so so they would
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step in and do all of that pay the
creditors and then they close the case
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and for a lot of folks I get it they
just want a nice tidy bow on it to say
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I'm done the business felt bankruptcy
there's nothing else to do but
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understand if your business doesn't
really have any assets um you're
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basically just paying an attorney to
file this for your piece of money and
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maybe that's worth it to you I always
like to just tell my clients set up
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front because they don't ever want
anyone to think that I'm not being you
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know completely honest with them and
then I'm just trying to make attorney
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fees you know for filing this case
because the whole purpose again is doing
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a liquidation and just repayment of
creditors but most of the entrepreneurs
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or small business owners that I work
with and their company is if it's a
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services company or whatnot and there's
no assets you know you can't sell a
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person so there's there's no asset that
can be liquid
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to be distributed accreditors so if
you're if you're having problems with
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your business you know definitely there
may be personal guarantees because most
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most small business owners have to file
you know sign of personal guarantee so
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that business credit card that you have
even if it's not popping up on your
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personal credit reports a lot of times
they don't chances are you had to
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provide your social and your personal
guarantee to that card so once your
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business defaults they will come after
you if you signed a lease most landlords
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will make you personally sign leases for
this very reason so that they have
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someone to go after if a business folds
so those may be very real reasons where
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you need to you know look at filing a
bankruptcy personally also you do need
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to keep this in mind when a business
files a chapter 7 bankruptcy of business
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is a separate legal entity so the
trustee will step in and they will look
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at the business records or whatnot and I
have seen this not with my clients but
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I've seen it in bankruptcy court room
where a person will file a bankruptcy
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for their business but then that when
the trustee looks at distributions that
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the the business made to this to the
owner the trustee will go after the
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owner to claw back some of that money
because it's it's deemed to be you know
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a preferential transfer you know it
wasn't just a regular salary you know
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the the owner pulls out a hundred
thousand dollars and then files
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bankruptcy in the business well of
course the trustee is going to go after
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that so they can pay the creditors so
sometimes I've seen people file a
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bankruptcy for their business because
they think they're doing the right thing
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and they really just shot themselves in
the foot whereas if they just you know
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if they had just filed a personal
bankruptcy later they would have been
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fine
but now in their own business they have
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they've got a trustee coming after them
to take money that they've received and
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sometimes you know maybe the the
withdrawals or the drawers were we're
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kind of sporadic but you know that it
was because that's how they were paying
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themselves but they've now created this
huge headache for themselves and it's
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gonna be expensive because you're gonna
have to have legal counsel to just sort
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through all of that so you know if
you're thinking about filing a business
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chapter 7 you really really really
need to evaluate if it's necessary and
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of course every case is different and
we're always happy to sit down and take
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a look and go over concerns and I have
some clients I just did a case a
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business case a few weeks ago and the
client was like you I hear you I know
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everything you're saying I've already
gone through my books there's been no
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crazy withdrawals or whatnot
I just want to wind this down and and
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that's fine but just make sure before
you do embark on a business chapter 7
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bankruptcy that you look at all the
angles if you have ever have any
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questions about business banker chapter
7 bankruptcy or any bankruptcy questions
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in general don't hesitate to contact us
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