Archive for category: Video

If you are self-employed or own your own business, you should prepare monthly financial statements to understand how your business is performing.  Realistically, financial statements are often the last thing a small business owner worries about.  He or she is usually more concerned about how to make the next sale or generate the next contract.  However, when an individual files bankruptcy, the financial statements of the business are required to determine the profitability of the business as well as the value of the business.

For our purposes, there are two basic financial statements for your business that will be required when you file personal bankruptcy:  a profit and loss and a balance sheet.

The profit and loss reflects the profitability of the business over a period of time.  It takes into consideration the business’s income, expenses and the resulting profit or loss.  The period of time could be weekly, monthly, quarterly, annually, etc.  For the bankruptcy, we will want the profit and loss for each of the six months prior to filing bankruptcy as well as a current period year-to-date.  For example, if you are filing bankruptcy in April 2011, you would need the profit and loss statements for October, November, and December 2010 as well as January, February and March 2011.  In addition, an April 2011 year-to-date profit and loss would also be required.  We will look at the component of a profit and loss in more detail in another blog post.

The balance sheet reflects the value of the company at a point in time.  It is usually considered the most important financial statement for the business, but oddly enough, it is often overlooked by everyone except for your accountant and banker.   The balance sheet takes into consideration the profit or loss for the company as well as the assets and liabilities for the company.  A balance sheet is sometimes referred to as the thermometer of the business, since you can use it to check the business’ “temperature” to determine if it is “healthy – 98.6” or “sick – 102.”  The balance sheet reflects the true value of the business at a point in time, such as March 30, 2011.  If on March 30, 2011 your business has a value of $10,000, you should be able to sell the business for $10,000 if you have a willing and able buyer.  We will look at the components of a balance sheet in another blog post.

Preparing and understanding the financial statements for your business can be an overwhelming task.  Many small businesses purchase accounting software to help them prepare the financial statement or they may hire an accountant to assist the business owners.  Let’s look at a simplified version in the blog post, The Basics of Understanding Financial Statements for Your Business.

When filing bankruptcy you have the option to continue to pay for your car lease payment or you can opt out of your car lease payment.  In a bankruptcy you can legally be released from many of your contractual obligations, this includes things like cell phone contracts, apartment leases, and even a car lease.  In a Chapter 7 bankruptcy those debts will be wiped out. In a Chapter 13 bankruptcy you will pay back only a portion of the total amount owed.

For example, John Doe has one year left on a car lease and is paying $300 a month.  If he does not want to continue the lease and at the time of filing a Chapter 7 bankruptcy he will return the car (after speaking with his bankruptcy attorney first) and will no longer be responsible for that $300 payment each month. Therefore, the additional $3,600 that John Doe would have paid through the end of his lease will be included in his bankruptcy.  In a Chapter 7 bankruptcy the $3,600 will be wiped out. If, instead, John Doe were filing a Chapter 13 bankruptcy then he would be responsible for a portion of the remaining balance.

There are some important things to consider before deciding not to continue the lease. First, and probably the most obvious, is that you will need to return the car.  If that car is your family’s only means of transportation and is a reasonable lease you may want to think twice before surrendering the lease into the bankruptcy.

Another factor to consider is if anyone else’s name is on the lease.  If you and your mother, or boyfriend/girlfriend etc. have both signed the lease then once you release that lease into bankruptcy that other person becomes solely responsible for the financial obligations of that lease.  For example, if John Doe is filing a Chapter 7 bankruptcy and his mother has co-signed the lease with him, she will be solely responsible for the lease payments if he surrenders the lease.

There are a number of things to keep in mind when deciding whether or not to keep your car lease when filing bankruptcy. It is important to know your options and to understand that you can surrender the lease if it is in your best interest.  If you chose to keep the lease then you would just continue your monthly payments as usual. As long as you are current on all payments most things in the lease would remain the same.