While a sale of business assets might
imply that a company is filing for Chapter 7 bankruptcy, it could also be a self-help strategy to avoid resorting to
bankruptcy. First
of all, as regards the sale of business assets away from bankruptcy, the
underlying laws surrounding such a maneuver are rather complex, especially in
terms of the policies of the Internal Revenue Service (IRS) enacted to address
these matters. Depending on the circumstances of the sale, the effectual nature
of the transaction will change accordingly.
When stakes in partnerships are sold, for
instance, they are treated as capital assets, those not normally involved in
everyday business affairs. Any sale of business assets and the
financial state of affairs of the debtor — i.e. the net gain or loss —
following non-bankruptcy liquidation may be divided amongst capital and
non-capital holdings.
As for a non-business sale of assets,
this is significantly more common than its corporate counterpart. While this
term may be confusing to some, getting paid money in exchange for the transfer
of personal property is the very definition of a sale of assets. Accordingly,
something as familiar to members of a suburban neighborhood as a garage sale
may qualify under this category. However, only a select few possessions will
likely be enough to generate the debtor-seller the funds he or she needs to
overcome his or her debt. It is because of this, therefore, that something like
a car or house may be taken in a straight sale instead.
While not a sale of assets as some may
traditionally know it, cashing out on investment funds may be another possible
way of trying to overcome debt amid feelings of desperation. That said, this is
a risky way for debtors to proceed. For one, borrowing from Social Security or
some other public benefit fund may leave Americans with little to make use of
once they hit retirement. In idiomatic terms, they may be robbing Peter to pay
Paul. Furthermore, there are often stiff penalties associated with early
withdrawal of deposits, notably for 401(k) plans. Thus, while bankruptcy could
hurt the solicitor for up to 10 years after the fact, an imprudent sale of
assets may result in substantial financial handicaps after one stops
working.
