What Happens To My Business Credit Card When I File For Bankruptcy?

Maybe you are a small business owner here in Milwaukee with a business credit card from your local bank. Or maybe your employer has you charge certain expenses to a company credit card. But if you have a business credit card, you are probably wondering what will happen to it if you file for bankruptcy. The answer is every lawyer’s favorite answer — it depends. 

Small Business Owner With A Business Credit Card 

If you are a small business owner, and you have a credit card for your business, it may or may not get pulled into your bankruptcy estate if you file for personal bankruptcy. It depends on how your business is structured and how your business is doing. 

There are so many factors at play in this scenario that you really need to consult with an experienced bankruptcy attorney to figure out what will happen in your specific situation. 

The Corporate Credit Card 

If your employer wants you to use a credit card to pay for work-related expenses, what happens to that card if you file for bankruptcy depends once again on your specific situation. 

There are two basic types of corporate credit card accounts — authorized user accounts and obligor accounts. 

An authorized user account is an account that is in your employer’s name. You are authorized to make business-related purchases with it, but the employer is the one paying the bill. If you file bankruptcy, you probably won’t have to list the account in the paperwork you file with the court since it’s not in your name. You should be able to continue using this card during your bankruptcy for work-related expenses and after your case is over since the card is owned and paid for by your employer. 

If you have a credit card that you use for work-related expenses on your company’s behalf, but the card is in your name and you are personally responsible for paying the bill (and then submitting paperwork to get reimbursed by your company), the account is an obligor account. 

This card will likely need to be disclosed to the court when you file your bankruptcy case. If there is a balance on the card, it will need to be reported as a debt you owe even if all of the debt will eventually be reimbursed by your company. 

The bank that backs this credit card will probably shut it down, so your company will need to either give you a new card where you are just an authorized user or work out some other arrangement. 

Your bankruptcy attorney can help you figure out what kind of card you have and what actions need to be taken to move your bankruptcy forward. 

Do you need to tell your employer you are filing for bankruptcy if you have a company credit card? 

It’s really none of your employer’s business if you file for personal bankruptcy, but if you have a company credit card it becomes of interest to them. In most cases, it is better for you to tell your employer what is going on than for them to find out from the court or from the credit card company. 

Looking for advice? 

Working with an experienced bankruptcy attorney will smooth the bankruptcy process and ensure that your business credit cards are treated appropriately. If you are looking for advice on this topic, please contact our office in Milwaukee to schedule an appointment.

Can We Keep the Cabin?

Owning a cabin “Up North” is a Wisconsin tradition going back generations. Whether it is a two-room shack with no running water or a newly built mansion with its own boathouse, Wisconsinites love their weekend get-aways. When we talk to a client that is considering filing for bankruptcy, we often get questions about what will happen to the family’s vacation home. 

The answer is every lawyer’s favorite answer — it depends. It depends on who actually owns the property, whether the property is owned outright or has a mortgage or liens attached to it, and what chapter of the bankruptcy code the debtor is filing under. 

Who owns the property? 

Many Wisconsin vacation homes are owned by more than one person. Sometimes brothers and sisters share ownership of a home that was purchased by mom and dad years ago. Sometimes the home is owned by a trust but primarily used by the person filing for bankruptcy. This complicated things, but it is so common there is a lot of case law we can rely on when we argue that a particular property should be saved. 

In general, it is easier for a debtor to hold on to a cabin that is owned by several family members or a trust than one that is owned by the debtor alone. 

How much equity is there in the cabin? 

This may seem counterintuitive, but if a vacation home is debt-free it may be more difficult to keep out of the bankruptcy estate. If the debtor has a lot of equity in his or her vacation home, and selling it would help pay off the creditors, the bankruptcy trustee may decide it would be best to sell it. 

If there is not going to be a lot of meat on the bone after the sale is made, commissions are paid, and liens are paid off, the trustee may decide it is not worth the effort to sell the property. 

What chapter of the code is the filing under? 

People who file for bankruptcy under Chapter 7 of the bankruptcy code should be prepared to see their second home sold off. Chapter 7 is a liquidation bankruptcy, and the property is just another asset, no matter how much sentimental value it holds. 

Filing under Chapter 13 of the bankruptcy code may allow a debtor to hold on to a second home if the debtor will be able to pay off their creditors through the Chapter 13 repayment plan process.

You Are Not Alone

Keep in mind that all this is just general information, if you want advice about what to do in your specific situation, you need to contact our office in Milwaukee to make an appointment. There are around 188,000 seasonal or recreational homes in Wisconsin, and you will not be the first owner our office has advised who would do anything to hold on to their little slice of heaven Up North.

Debt Restructuring Fails To Save Sand Mine From Bankruptcy

Earlier this year, one of the biggest sand mining companies in the state of Wisconsin entered into a debt restructuring agreement with its lenders in a last-ditch effort to stave off bankruptcy. Unfortunately, the move didn’t work, and the company has now declared bankruptcy, but it is an interesting example of what tactics can be tested before a company resorts to bankruptcy

Sand mining is a thing? 

If you were unaware that sand is big business, you may want to check out this story from 99% Invisible that explains why “[s]and is actually the most important solid substance on Earth… It’s the literal foundation of modern civilization.”

And it turns out that the sand found in our state, which is known as “Northern White” to those in the sand industry, is exceptionally good sand — hard and round. So good, in fact, it was being shipped clear to Texas for use in the frac mining industry. 

The frac mining boom set off a corresponding sand mining boom in Wisconsin. From 2011 to 2014 they couldn’t dig the stuff out of the ground fast enough. However, shipping sand across the country is expensive. So, frac miners in Texas started looking for sand closer to home. What they found wasn’t as good, but it was good enough that the demand for Wisconsin sand dropped. At around the same time, the price of oil fell and the demand for frac sand dropped overall as oil producers slowed production. And that’s where we are today — Wisconsin still has great sand, but it is not worth what it once was.

Staving Off Bankruptcy 

Earlier this year, Emerge Energy Services LP, which owns Superior Silica Sands, entered into a debt restructuring agreement with its lenders. The deal would clear Emerge Energy’s debt obligations while making its lenders the new majority shareholders of the company.

Debt restructuring is a common tactic in the business world and one we have helped both creditors and debtors navigate. When it is successful, it can keep a company out of bankruptcy while preserving assets and maintaining production. Keeping the company up and running can also prevent one shutdown from turning into a chain reaction that pushes a whole industry or supply chain into bankruptcy. 

Unfortunately for Emerge Energy, the debt restructuring negotiations failed and the company filed for Chapter 11 bankruptcy. The Daily Reporter pulled the company’s court filings and found that it “owes creditors across the country some $338 million. A list of the company’s 30 largest creditors in court documents includes seven companies that have their headquarters in Wisconsin. Emerge says it owes these firms more than $13 million in total.” 

Hopefully, Emerge Energy’s bankruptcy will not push its creditors into insolvency as well. It may, however, be just the first of many sand companies in our state that files for bankruptcy protection. There are 128 frac sand facilities operating in the state, all producing more sand than the market can bear.