Central District Consumer Bankruptcy Attorney's Association

Previously the Santa Barbara trustees would stipulate to this (abandonment), but apparently they will not do so any longer, or so they say.
>
> The concern of many trustees is that the business may incur post-petition
> liabilities that may reduce the value of the business -- the way they phrase
> it, for example, is that from the petition date until they are exonerated,
> they are "liable for anything that happens at the business (e.g., a slip and
> fall, etc) and you better shut down now." What I do with my clients is that
> I ensure that they have general liability insurance as well as any customary
> insurance in place prior to filing. Despite that, some trustees will ask
> you to move to compel the trustee to abandon the business, which causes the
> client to incur another $150 filing fee plus the time for your work .
>
> On Fri, Aug 13, 2010 at 6:18 PM, Mark J. Markus wrote:
>
> >
> >
> > This is a great question and I had a long dialogue recently with another
> > attorney on this matter. Chapter 7 simply does not allow a debtor to
> > continue operating ANY business. The correct thing to do in these
> > situations is, in fact, to have the debtor incorporate, and then file the
> > Chapter 7. However, this is not always economically feasible and, for all
> > practical purposes, may be unnecessary. This usually comes down to what
> > assets the debtor needs to use in their "business". For many self-employed
> > people their business is their personal services, such as a musician or
> > painter. Who is to say that they didn't start a "new" business on the date
> > their bankruptcy petition was filed? The problem is, when you really
> > analyze it, there's almost no way they can start a new business without
> > using some pre-petition assets (e.g. customer list, pens, pencils, etc.) and
> > while these may all be exempt, there is nothing in the statutory
> > proscription from "operating a business" Chapter 7 that excludes using all
> > exempt assets in the business.
> >
> >
> > I'd be curious to hear others' responses on this as well.
> >
> > *************************
> > Mark J. Markus
> > Law Office of Mark J. Markus
> > 11684 Ventura Blvd. PMB #403
> > Studio City, CA 91604-2652
> > (818)509-1173 (818)509-1460 (fax)
> > web: http://www.bklaw.com/
> > This Firm is a Qualified Federal Debt Relief Agency (see what this means at http://bklaw.com/bankruptcy-blog/2008/0 ... efinition/)
> > ________________________________________________
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> >
> >
> > On 8/13/2010 5:58 PM, Holly Roark wrote:
> >
> > Do you ever file personal chapter 7s for people who want to keep their
> > small business running?
> >
> > I have had a couple cases where I filed personal Chapter 7s for sole
> > proprietors where I did not run into any problems with a Chapter 7 trustee.
> > One of the debtors was a caterer, another one was a hair stylist. The
> > assets in each were all exempted and the debtors received a discharge
> > without any interruption to their businesses.
> >
> > Does incorporating or forming an LLC really make much of a difference
> > if the business is run by only one person? I assume if the trustee was
> > interested then he could just vote the shares to liquidate so
> > incorporating would not really offer the debtor any real protection.
> >
> > I guess my question is: when is it really NOT a good idea to file such
> > cases? It was brought to my attention that technically the debtor doesn't
> > even have authority to continue with the business in a Chapter 7 (if it's a
> > sole proprietorship) and any income generated from the business is an asset
> > of the estate. While this may be true, practically speaking, it has not
> > been an issue in any of my cases since the debtors did not make that much
> > money and there were no real assets to liquidate.
> >
> > For those who have been around a while, what is your take on this? Do you
> > always file Chapter 13s for people who want to keep their small businesses
> > running? Is there any benefit to having the debtor incorporate the business
> > before you file a Chapter 7? What horrible thing (other than liquidation,
> > shut down, and a malpractice suit) am I not seeing here?
> >
> > --
> > Holly Roark
> > holly@...
> > www.roarklawoffices.com
> > Central District of California
> > Consumer Bankruptcy Attorney
> >
> >
> >
>
>
>
> --
> Giovanni Orantes, Esq.
> Orantes Law Firm, P.C.
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The post was migrated from Yahoo.

Addendum to above. They are not just telling you to shut it down. They are enforcing it.
>
> This is becoming a big issue lately in Santa Barbara, as anyone else here who practices up there can attest...
>
> Lately, the trustees there are taking the stance that pretty much any business (save for a home-based business) may not operate in a 7. If there are any employees, or if the business is open to the public in any way, you can pretty much bet on the fact that they'll tell you to shut it down, or get out of the 7. Providing proof of insurance, even naming the Trustee as an insured will not cut it, they will shut it down. However, they will not do so if it is a corporation.
>
> The word on the streets (I've heard this from a couple other attorneys up there, can't say I actually know this for a fact) is that Judge Riblet is not all that happy with this - because of the Trustees' stance, these cases are being converted to 13s, and so her overflowing 13 calendar is burdened even more, leading her to ask why she's getting these 13s that really aren't and can't be 13s.
>
> As for my own cases, I am advising Northern Division (Santa Barbara) clients who have a business to either incorporate it, or sign off on my letter explaining that there is a risk of the business being shut down. I liked the idea of taking the extra step naming the Trustee as an insured would have cut it, but apparently not.
>
> Todd Mannis, Esq.
>
>
>
> --- In cdcbaa@yahoogroups.com, Holly Roark wrote:
> >
> > Do you ever file personal chapter 7s for people who want to keep their small
> > business running?
> >
> > I have had a couple cases where I filed personal Chapter 7s for sole
> > proprietors where I did not run into any problems with a Chapter 7 trustee.
> > One of the debtors was a caterer, another one was a hair stylist. The
> > assets in each were all exempted and the debtors received a discharge
> > without any interruption to their businesses.
> >
> > Does incorporating or forming an LLC really make much of a difference if the
> > business is run by only one person? I assume if the trustee was interested
> > then he could just vote the shares to liquidate so incorporating would not
> > really offer the debtor any real protection.
> >
> > I guess my question is: when is it really NOT a good idea to file such
> > cases? It was brought to my attention that technically the debtor doesn't
> > even have authority to continue with the business in a Chapter 7 (if it's a
> > sole proprietorship) and any income generated from the business is an asset
> > of the estate. While this may be true, practically speaking, it has not
> > been an issue in any of my cases since the debtors did not make that much
> > money and there were no real assets to liquidate.
> >
> > For those who have been around a while, what is your take on this? Do you
> > always file Chapter 13s for people who want to keep their small businesses
> > running? Is there any benefit to having the debtor incorporate the business
> > before you file a Chapter 7? What horrible thing (other than liquidation,
> > shut down, and a malpractice suit) am I not seeing here?
> >
> > --
> > Holly Roark
> > holly@
> > www.roarklawoffices.com
> > Central District of California
> > Consumer Bankruptcy Attorney
> >
>

The post was migrated from Yahoo.

This is becoming a big issue lately in Santa Barbara, as anyone else here who practices up there can attest...
Lately, the trustees there are taking the stance that pretty much any business (save for a home-based business) may not operate in a 7. If there are any employees, or if the business is open to the public in any way, you can pretty much bet on the fact that they'll tell you to shut it down, or get out of the 7. Providing proof of insurance, even naming the Trustee as an insured will not cut it, they will shut it down. However, they will not do so if it is a corporation.
The word on the streets (I've heard this from a couple other attorneys up there, can't say I actually know this for a fact) is that Judge Riblet is not all that happy with this - because of the Trustees' stance, these cases are being converted to 13s, and so her overflowing 13 calendar is burdened even more, leading her to ask why she's getting these 13s that really aren't and can't be 13s.
As for my own cases, I am advising Northern Division (Santa Barbara) clients who have a business to either incorporate it, or sign off on my letter explaining that there is a risk of the business being shut down. I liked the idea of taking the extra step naming the Trustee as an insured would have cut it, but apparently not.
Todd Mannis, Esq.
>
> Do you ever file personal chapter 7s for people who want to keep their small
> business running?
>
> I have had a couple cases where I filed personal Chapter 7s for sole
> proprietors where I did not run into any problems with a Chapter 7 trustee.
> One of the debtors was a caterer, another one was a hair stylist. The
> assets in each were all exempted and the debtors received a discharge
> without any interruption to their businesses.
>
> Does incorporating or forming an LLC really make much of a difference if the
> business is run by only one person? I assume if the trustee was interested
> then he could just vote the shares to liquidate so incorporating would not
> really offer the debtor any real protection.
>
> I guess my question is: when is it really NOT a good idea to file such
> cases? It was brought to my attention that technically the debtor doesn't
> even have authority to continue with the business in a Chapter 7 (if it's a
> sole proprietorship) and any income generated from the business is an asset
> of the estate. While this may be true, practically speaking, it has not
> been an issue in any of my cases since the debtors did not make that much
> money and there were no real assets to liquidate.
>
> For those who have been around a while, what is your take on this? Do you
> always file Chapter 13s for people who want to keep their small businesses
> running? Is there any benefit to having the debtor incorporate the business
> before you file a Chapter 7? What horrible thing (other than liquidation,
> shut down, and a malpractice suit) am I not seeing here?
>
> --
> Holly Roark
> holly@...
> www.roarklawoffices.com
> Central District of California
> Consumer Bankruptcy Attorney
>

The post was migrated from Yahoo.