Bankruptcy and Businesses

Sometimes debtors have businesses they wish to retain through a bankruptcy proceeding or are self-employed. There is additional information these debtors will need to complete in order for the trustee to evaluate their case. When a debtor is in a Chapter 7 or Chapter 13 bankruptcy and they are self-employed, the debtor will need to include their self-employment information in the Statement of Financial Affairs portion of the petition. They will also need to include their income in Schedule I and include any business expenses in Schedule J. They will need to account for any income in the last six months for the means test and deduct any expenses that are related to their self-employment.

A debtor who owns a business will have to complete the same information so the trustee can determine how much income they have received, as well as how much they have spent on business related expenses. The difference between these two is considered their income for purposes of the means test and will also be used in Schedule I, J, and the Statement of Financial Affairs. If a debtor owns a business, they will need to fill out a supplemental form in the petition titled “Business Income and Expenses” which itemizes the income for the last 12 months and the individual expenses, such as utilities, maintenance, etc. They will also need to fill out a Business Case Questionnaire and send it to the trustee. This form asks for the name of the business, the description of the business, whether it is incorporated, the federal ID number, bank accounts for the business, tax returns, monthly budget, employees of the business, inventory, whether the business is cyclical (i.e. landscaping, snow removal, etc.), whether the business owns or leases office space and/or equipment, the insurance policies for the business, and whether they have business licenses, etc. The debtor is required to fill out this information sheet and provide it at the creditor meeting. The trustee will generally not conduct the creditor meeting without this information sheet. Additionally, any debtor conducting business will generally need to be put on the business docket for the creditor meeting. The debtor’s attorney will need to call the court to arrange any cases for the business docket.

If you live in Missouri or Illinois and you have any questions about bankruptcy and business, please contact a St. Louis or St. Charles bankruptcy attorney.