How to Keep Accounts Receivable During Bankruptcy
Two types of bankruptcy options are available to people experiencing significant financial hardship. Chapter 7 is a liquidation where all assets are used to pay off debts. Chapter 13 is called restructuring, allowing you to keep assets as long as they are disclosed and approved by the bankruptcy trustee. In either case, there are options available to keep accounts receivable coming in from personal business clients.
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Instructions
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Disclose all assets, debts, income and accounts receivable pertaining your personal finances in your bankruptcy petition.
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Go to the meeting of the creditors, where the trustee will review your petition, hear any contesting from creditors and discuss whether you have any assets that can be used to pay the debts.
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Answer all questions the trustee has for you regarding the accounts receivable. He may ask how old the receivables are to determine the likelihood of collecting the funds in a timely fashion to affect the bankruptcy debt. Notify him of any changes in the receivables, such as default of receivables by clients.
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Follow the federal guidelines as directed by the trustee regarding the receivables. In Chapter 13, you will retain receivables that become part of the restructuring payment program. In Chapter 7, you may be allowed to keep receivables along with some cash if you do not own a home. Trustees will designate what you can keep and what must be liquidated for debt repayment before discharge.
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Tips & Warnings
When in bankruptcy, moving assets to protect them from creditors is strictly prohibited.
