Q: Two small business entanglement debt and liability question.
My employer (E) has two small businesses (A and B) both 100% owned by E. Business A owes business B a significant amount of money for services accumulated throughout the years. However, E wants to protect the assets of A from any happenings relating to B. If B goes bankrupt will the creditors of B gain the rights to A's debt to B? In other words, is A's debt to B a transferable collateralized asset that the creditors of B can sue A for?
A:
What is this? Final exam in Bankruptcy 202?
Your employer needs to discuss the entire situation with a qualified bankruptcy attorney. So much depends on the paper trail of the transactions and the actual relationship among the parties.
Good Luck
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Timothy Denison agrees with this answer
A:
A trustee in bankruptcy "steps into the shoes of the debtor". Consequently, a bankruptcy trustee is entitled to pursue and collect/liquidate any obligations to the debtor.
That's in a Chapter 7 case, where a trustee is automatically appointed.
In a Ch. 11, the debtor becomes/has the powers of a trustee, under the Bankruptcy Code.
So yes, in the event of a bankruptcy, the "bankruptcy trustee" of B will be entitled to go after A's indebtedness to B.
And if the debtor, acting with trustee powers, fails to pursue A, the creditors of B can compel him to do so. (In a Chapter 11, the Creditors' Committee often undertakes collection efforts against "affiliates" of the debtor.)
A corporation is not eligible to file a Ch. 13 case.
Timothy Denison agrees with this answer
1 user found this answer helpful
A:
Your "employer" needs to talk with an experienced bankruptcy attorney in order to determine their best course of action. This is not a decision that should be made lightly. Do not rely on a "mass-production" law firm (one that pays for advertising on the Internet or TV). Instead, your "employer" should do their own due-diligence and find an attorney with at lease 10 years of experience in business bankruptcy matters.
I hope this is helpful.
Timothy Denison agrees with this answer
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