Quick Guide to Sale of Assets
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.
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