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Do you ever file personal chapter 7s for people who want

Posted: Tue Aug 17, 2010 10:55 am
by Yahoo Bot

Mark T.Jessee wrote:
"There is no distinction between the debts of a debtor and debts of the
debtor's sole proprietorship. Debts of the sole proprietorship do not
attach to any particular assets unless specifically secured by that asset
through a valid security agreement or by operation of law."
Is it your opinion that if the sole proprietor was in debt to say, Yellow
Pages for $5,000, under an agreement between Yellow Pages and the sole
proprietor's DBA, when the sole proprietor incorporates, that debt won't be
transferred to the corp, but will be discharged in the personal BK despite
it being a "business debt"?
Holly Roark
holly@roarklawoffices.com
On Tue, Aug 17, 2010 at 2:08 AM, Mark T.Jessee wrote:
>
>
> Perhaps I missed some nuanced fact in this string, but unless there are
> business assets which a trustee would liquidate in a chapter 7, I am not
> following Dennis' logic. I usually see more harm than benefit to the debtor
> by waiting to incorporate postpetition instead of incorporating
> prepetition.
>
> Incorporating prior to the bankruptcy appears to usually provide the
> smoothest outcome for the debtor if there are no nonexempt business assets.
> Shutting down the business will cause the loss of income to the debtor and
> the loss of key components to the business, i.e. the telephone number,
> office space, employees, customer lists, etc. That is not something the
> debtor can conveniently replace when incorporating a new business
> postpetition. Incorporating prepetition prevents these hits to the business
> operation. There is no distinction between the debts of a debtor and debts
> of the debtor's sole proprietorship. Debts of the sole proprietorship do
> not attach to any particular assets unless specifically secured by that
> asset through a valid security agreement or by operation of law. If a
> prospective debtor incorporates a sole proprietorship prepetition, the
> assets transferred and used to fund the corporation are in return for the
> stock being issued in the prospective debtor's name. The debts do not
> attach to the corporation. The shares of the stock of the corporation are
> the prospective debtor's asset instead of the specific business assets. As
> most small businesses in this situation do not usually have any significant
> goodwill value without the business principal working in transition with a
> new owner, and since a chapter 7 trustee cannot force a debtor to work for a
> new business owner, it really comes down to an analysis of the likely value
> after liquidation of assets. Liquidating a sole proprietorship
> only involves assets. Liquidating a corporation requires payment to
> corporate creditors first before anything is distributed to the shareholder
> trustee. With appropriate prebankruptcy planning incorporating a new
> business will have normal creditors, office lease, employee salaries,
> payroll and/or sales taxes, utilities, etc. From a practical point it makes
> an incorporated business less enticing to liquidate than a sole
> proprietorship.
>
> Looking at sole proprietorship vs. corporation in completing the means test
> also favors prepetition incorporation. Ever since the Wiegand BAP decision
> 2 years ago holding that business expenses cannot be deducted from business
> income in determining current monthly income, speakers at our group's
> monthly meetings constantly recommend incorporating a sole proprietorship
> prior to filing a bankruptcy case. That way only the gross revenue received
> by the debtor is counted instead the gross receipts of the business in
> determining cmi and whether a debtor is above or below median income.
> Granted Weigand was a chapter 13 case, but the same principal applies in
> chapter 7 marginal cases if a trustee or creditor asserts that business
> expenses should not be included in determining cmi in chapter 7 based on the
> Weigand analysis.
>
> Absent nonexempt business assets likely to be administered by a chapter 7
> trustee, I recommend incorporation to prospective debtors that have
> employees or have the type of sole proprietorship business a trustee is
> likely to shut down due to liability issues.
>
> Mark T. Jessee
> Law Offices of Mark T. Jessee
> "A Debt Relief Agency"
> 50 W. Hillcrest Drive, Suite 200
> Thousand Oaks, CA 91360
> (805) 497-5868
>
>
>
> *On Mon 16/08/10 1:21 PM , Dennis McGoldrick easky1@yahoo.com sent:
> *
>
>
>
> bk first. New Inc. after bk filed. All of old co's nonexempt assets,
> phone, etc., to trustee.
>
>
> --- On *Sat, 8/14/10, Holly Roark *wrote:
>
>
> Subject: Re: [cdcbaa] Do you ever file personal chapter 7s for people who
> want to keep their small business running?
> To: cdcbaa@yahoogroups.com
> Date: Saturday, August 14, 2010, 11:04 PM
>
>
> So then BK as a sole proprietor, possibly shut down, and then start
> newco?
>
> Holly Roark
> CDCA
> holly@roarklawoffices.com
>
> On Sat, Aug 14, 2010 at 10:53 PM, Dennis > wrote:
>
>
> Old co new co in this situation. New co owes all of old co's debts.
> Bk of principal does not help newco as it owes old co's debts. Must Bk,
> then start newco. Never start newco before Bk, as you carry old. Co's debts
> past the Bk.
> D
> Sent from my iPhone
>
> On Aug 14, 2010, at 3:10 PM, "Larry"
> wrote:
>
>
>
> In Santa Barbara, I have had clients keep their business going with both
> Corporation and LLCs. I would never take a small business owner into a
> ch7 without an INC or LLC . More likely than not the business is
> struggling, shutting it down for any length of time would be catastrophic.
> It only costs $100.00 to file articles of incorporation. The client can
> then make the S Corp tax election. For most small businesses, an S corp
> election is cheaper the $800/yr minimum California tax on LLCs AND the FTB
> wants the $800 within 4 months of filing.
>
>
>
>
>
>
>
>
>
> Larry Webb
>
> State Bar of California 229344
>
> Central District California
>
> "A Debt Relief Agency"
>
>
>
> Larry@webbklaw. com
>
> Law Offices of Larry Webb
>
> Camarillo Ca 93010
>
>
>
> P 805.987.1400 805.987.1400
>
> F 805.987.2866
>
> C 805.750.2150 805.750.2150
>
>
>
>
>
>
>
> *From:* cdcbaa@yahoogroups.com[mailto:
> cdcbaa@yahoogroups.com]
> *On Behalf Of *Holly Roark
> *Sent:* Saturday, August 14, 2010 2:49 PM
>
> *To:* cdcbaa@yahoogroups.com
> *Subject:* Re: [cdcbaa] Do you ever file personal chapter 7s for people
> who want to keep their small business running?
>
>
>
>
>
> If the debtor incorporates, though, then there's a better chance that the
> debtor can keep it up and running? Does it make a difference whether it is
> an Inc. or an LLC?
>
>
>
> I am glad to see all the discussion on this topic.
>
> --
> Holly Roark
> holly@roarklawoffices.com
The post was migrated from Yahoo.

Do you ever file personal chapter 7s for people who want

Posted: Sat Aug 14, 2010 11:12 pm
by Yahoo Bot

Or maybe form the inc., then file bk, but just figure out what portion of
debt is business debt and advise debtor that the new corp will be
responsible for that business debt though he can discharge his personal
liability?
Holly Roark
CDCA
holly@roarklawoffices.com
On Sat, Aug 14, 2010 at 11:04 PM, Holly Roark wrote:
> So then BK as a sole proprietor, possibly shut down, and then start newco?
>
> Holly Roark
> CDCA
> holly@roarklawoffices.com
>
> On Sat, Aug 14, 2010 at 10:53 PM, Dennis wrote:
>
>>
>>
>> Old co new co in this situation. New co owes all of old co's debts. Bk
>> of principal does not help newco as it owes old co's debts. Must Bk, then
>> start newco. Never start newco before Bk, as you carry old. Co's debts past
>> the Bk.
>> D
>> Sent from my iPhone
>>
>> On Aug 14, 2010, at 3:10 PM, "Larry" wrote:
>>
>>
>>
>> In Santa Barbara, I have had clients keep their business going with
>> both Corporation and LLCs. I would never take a small business owner into
>> a ch7 without an INC or LLC . More likely than not the business is
>> struggling, shutting it down for any length of time would be catastrophic.
>> It only costs $100.00 to file articles of incorporation. The client can
>> then make the S Corp tax election. For most small businesses, an S corp
>> election is cheaper the $800/yr minimum California tax on LLCs AND the FTB
>> wants the $800 within 4 months of filing.
>>
>>
>>
>>
>>
>>
>>
>>
>>
>> Larry Webb
>>
>> State Bar of California 229344
>>
>> Central District California
>>
>> "A Debt Relief Agency"
>>
>>
>>
>> Larry@webbklaw. com
>>
>> Law Offices of Larry Webb
>>
>> Camarillo Ca 93010
>>
>>
>>
>> P 805.987.1400
>>
>> F 805.987.2866
>>
>> C 805.750.2150
>>
>>
>>
>>
>>
>>
>>
>> *From:* cdcbaa@yahoogroups.com [mailto:cdcbaa@yahoogroups.com] *On Behalf
>> Of *Holly Roark
>> *Sent:* Saturday, August 14, 2010 2:49 PM
>>
>> *To:* cdcbaa@yahoogroups.com
>> *Subject:* Re: [cdcbaa] Do you ever file personal chapter 7s for people
>> who want to keep their small business running?
>>
>>
>>
>>
>>
>> If the debtor incorporates, though, then there's a better chance that the
>> debtor can keep it up and running? Does it make a difference whether it is
>> an Inc. or an LLC?
>>
>>
>>
>> I am glad to see all the discussion on this topic.
>>
>> --
>> Holly Roark
>> holly@roarklawoffices.com
>> www.roarklawoffices.com
>> Central District of California
>> Consumer Bankruptcy Attorney
>>
>>
>>
>>
>
>
>
> --
> Holly Roark
> holly@roarklawoffices.com
> www.roarklawoffices.com
> Central District of California
> Consumer Bankruptcy Attorney
>
Holly Roark
holly@roarklawoffices.com
www.roarklawoffices.com
Central District of California
Consumer Bankruptcy Attorney
Or maybe form the inc., then file bk, but just figure out what portion of debt is business debt and advise debtor that the new corp will be responsible for that business debt though he can discharge his personal liability?
Holly Roark
CDCA
holly@roarklawoffices.com
On Sat, Aug 14, 2010 at 11:04 PM, Holly Roark <hollyroark22@gmail.com> wrote:
So then BK as a sole proprietor, possibly shut down, and then start newco?
Holly Roark
CDCA
holly@roarklawoffices.com
On Sat, Aug 14, 2010 at 10:53 PM, Dennis <easky1@yahoo.com> wrote:
Old co new co in this situation. New co owes all of old co's debts. Bk of principal does not help newco as it owes old co's debts. Must Bk, then start newco. Never start newco before Bk, as you carry old. Co's debts past the Bk.
DSent from my iPhone
On Aug 14, 2010, at 3:10 PM, "Larry" <larry@webbklaw.com> wrote:
In Santa Barbara, I have had clients keep their business going with both Corporation and LLCs. I would never take a small business owner into a ch7 without an INC or LLC . More likely than not the business is struggling, shutting it down for any length of time would be catastrophic.can then make the S Corp tax election. For most small businesses, an S corp election is cheaper the $800/yr minimum California tax on LLCs AND the FTB wants the $800 within 4 months of filing.
Larry Webb
State Bar of California 229344
Central District California
"A Debt Relief Agency"
Larry@webbklaw. com
Law Offices of Larry Webb
Camarillo Ca 93010
P 805.987.1400
F 805.987.2866
C 805.750.2150
From: cdcbaa@yahoogroups.com [mailto:cdcbaa@yahoogroups.com] On Behalf Of Holly Roark
Sent: Saturday, August 14, 2010 2:49 PM
To: cdcbaa@yahoogroups.comSubject: Re: [cdcbaa] Do you ever file personal chapter 7s for people who want to keep their small business running?
If the debtor incorporates, though, then there's a better chance that the debtor can keep it up and running? Does it make a difference whether it is an Inc. or an LLC?
I am glad to see all the discussion on this topic.klawoffices.com" target"_blank">holly@roarklawoffices.com
www.roarklawoffices.comCentral District of CaliforniaConsumer Bankruptcy Attorney
-- Holly Roarkholly@roarklawoffices.com
www.roarklawoffices.comCentral District of CaliforniaConsumer Bankruptcy Attorney-- Holly Roark
holly@roarklawoffices.comwww.roarklawoffices.comCentral District of CaliforniaConsumer Bankruptcy Attorney

The post was migrated from Yahoo.

Do you ever file personal chapter 7s for people who want

Posted: Sat Aug 14, 2010 11:04 pm
by Yahoo Bot

So then BK as a sole proprietor, possibly shut down, and then start newco?
Holly Roark
CDCA
holly@roarklawoffices.com
On Sat, Aug 14, 2010 at 10:53 PM, Dennis wrote:
>
>
> Old co new co in this situation. New co owes all of old co's debts. Bk
> of principal does not help newco as it owes old co's debts. Must Bk, then
> start newco. Never start newco before Bk, as you carry old. Co's debts past
> the Bk.
> D
> Sent from my iPhone
>
> On Aug 14, 2010, at 3:10 PM, "Larry" wrote:
>
>
>
> In Santa Barbara, I have had clients keep their business going with both
> Corporation and LLCs. I would never take a small business owner into a
> ch7 without an INC or LLC . More likely than not the business is
> struggling, shutting it down for any length of time would be catastrophic.
> It only costs $100.00 to file articles of incorporation. The client can
> then make the S Corp tax election. For most small businesses, an S corp
> election is cheaper the $800/yr minimum California tax on LLCs AND the FTB
> wants the $800 within 4 months of filing.
>
>
>
>
>
>
>
>
>
> Larry Webb
>
> State Bar of California 229344
>
> Central District California
>
> "A Debt Relief Agency"
>
>
>
> Larry@webbklaw. com
>
> Law Offices of Larry Webb
>
> Camarillo Ca 93010
>
>
>
> P 805.987.1400
>
> F 805.987.2866
>
> C 805.750.2150
>
>
>
>
>
>
>
> *From:* cdcbaa@yahoogroups.com [mailto:cdcbaa@yahoogroups.com] *On Behalf
> Of *Holly Roark
> *Sent:* Saturday, August 14, 2010 2:49 PM
>
> *To:* cdcbaa@yahoogroups.com
> *Subject:* Re: [cdcbaa] Do you ever file personal chapter 7s for people
> who want to keep their small business running?
>
>
>
>
>
> If the debtor incorporates, though, then there's a better chance that the
> debtor can keep it up and running? Does it make a difference whether it is
> an Inc. or an LLC?
>
>
>
> I am glad to see all the discussion on this topic.
>
> --
> Holly Roark
> holly@roarklawoffices.com
> www.roarklawoffices.com
> Central District of California
> Consumer Bankruptcy Attorney
>
>
>
>
Holly Roark
holly@roarklawoffices.com
www.roarklawoffices.com
Central District of California
Consumer Bankruptcy Attorney
So then BK as a sole proprietor, possibly shut down, and then start newco?
Holly Roark
CDCA
holly@roarklawoffices.com
On Sat, Aug 14, 2010 at 10:53 PM, Dennis <easky1@yahoo.com> wrote:
Old co new co in this situation. New co owes all of old co's debts. Bk of principal does not help newco as it owes old co's debts. Must Bk, then start newco. Never start newco before Bk, as you carry old. Co's debts past the Bk.
DSent from my iPhone
On Aug 14, 2010, at 3:10 PM, "Larry" <larry@webbklaw.com> wrote:
In Santa Barbara, I have had clients keep their business going with both Corporation and LLCs. I would never take a small business owner into a ch7 without an INC or LLC . More likely than not the business is struggling, shutting it down for any length of time would be catastrophic.can then make the S Corp tax election. For most small businesses, an S corp election is cheaper the $800/yr minimum California tax on LLCs AND the FTB wants the $800 within 4 months of filing.
Larry Webb
State Bar of California 229344
Central District California
"A Debt Relief Agency"
Larry@webbklaw. com
Law Offices of Larry Webb
Camarillo Ca 93010
P 805.987.1400
F 805.987.2866
C 805.750.2150
From: cdcbaa@yahoogroups.com [mailto:cdcbaa@yahoogroups.com] On Behalf Of Holly Roark
Sent: Saturday, August 14, 2010 2:49 PM
To: cdcbaa@yahoogroups.comSubject: Re: [cdcbaa] Do you ever file personal chapter 7s for people who want to keep their small business running?
If the debtor incorporates, though, then there's a better chance that the debtor can keep it up and running? Does it make a difference whether it is an Inc. or an LLC?
I am glad to see all the discussion on this topic.klawoffices.com" target"_blank">holly@roarklawoffices.com
www.roarklawoffices.comCentral District of CaliforniaConsumer Bankruptcy Attorney
-- Holly Roarkholly@roarklawoffices.comwww.roarklawoffices.com
Central District of CaliforniaConsumer Bankruptcy Attorney

The post was migrated from Yahoo.

Do you ever file personal chapter 7s for people who want

Posted: Sat Aug 14, 2010 4:51 pm
by Yahoo Bot

The INC is an asset not party in the bk.
Sent from my Verizon Wireless BlackBerry
Sender: cdcbaa@yahoogroups.com
Date: Sat, 14 Aug 2010 14:48:46
To:
Reply-To: cdcbaa@yahoogroups.com
Subject: Re: [cdcbaa] Do you ever file personal chapter 7s for people who want
to keep their small business running?
If the debtor incorporates, though, then there's a better chance that the
debtor can keep it up and running? Does it make a difference whether it is
an Inc. or an LLC?
I am glad to see all the discussion on this topic.
Holly Roark
holly@roarklawoffices.com
www.roarklawoffices.com
Central District of California
Consumer Bankruptcy Attorney

The post was migrated from Yahoo.

Do you ever file personal chapter 7s for people who want

Posted: Sat Aug 14, 2010 2:48 pm
by Yahoo Bot

If the debtor incorporates, though, then there's a better chance that the
debtor can keep it up and running? Does it make a difference whether it is
an Inc. or an LLC?
I am glad to see all the discussion on this topic.
Holly Roark
holly@roarklawoffices.com
www.roarklawoffices.com
Central District of California
Consumer Bankruptcy Attorney
If the debtor incorporates, though, then there's a better chance that the debtor can keep it up and running? Does it make a difference whether it is an Inc. or an LLC?
I am glad to see all the discussion on this topic.-- Holly Roarkholly@roarklawoffices.comwww.roarklawoffices.com
Central District of CaliforniaConsumer Bankruptcy Attorney

The post was migrated from Yahoo.

Do you ever file personal chapter 7s for people who want

Posted: Fri Aug 13, 2010 6:24 pm
by Yahoo Bot

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/)
> ________________________________________________
> NOTICE: This Electronic Message contains information from the law office of Mark J. Markus that may be privileged. The information is intended for the use of the addressee only. If you are not the addressee, note that any disclosure, copy, distribution or use of the contents of this message is prohibited.
> IRS CIRCULAR 230 NOTICE: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. tax advice contained in this communication (or in any attachment) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed in this communication.
>
>
> 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@roarklawoffices.com
> www.roarklawoffices.com
> Central District of California
> Consumer Bankruptcy Attorney
>
>
>
Giovanni Orantes, Esq.
Orantes Law Firm, P.C.
3435 Wilshire Blvd. Suite 1980
Los Angeles, CA 90010
Tel: (213) 389-4362
Phone: (888) 619-8222 x101
Fax: (877) 789-5776
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recommending to another party any transaction or matter addressed herein.
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 clientto incuranother $150 filing fee plus the time for your work .
On Fri, Aug 13, 2010 at 6:18 PM, Mark J. Markus <bklawr@yahoo.com> 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". 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.



The post was migrated from Yahoo.