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Estimate Insolvency
Filing for personal or corporate bankruptcy might be your final chance to save your business as it allows you to reorganize your liabilities and start from zero while protecting your IP, and, to some extent, assets.
To assess if this is the right option for you, start making a list of all your assets such as:
- Bank accounts
- Real estate
- Equipment
- Vehicles
- Computers
- Electronics
- Household goods
- Tools
- Jewelry
- Books
- Investments, equity, retirement accounts
- Security deposits
- Anything else?
The next step is to value all of these assets. Some of them have a nominal USD value on them, your bank account for example, but others are more complex to value. Here, the principle of fair market value is to be applied. Let’s take real estate as an example – if you are trying to value a condo or retail store, you will want to look at comparables, i.e. Zillow (or another real estate website) and estimate what similar properties in your neighborhood are currently valued at.
This is the approach that you want to follow for all items on your list, and you want to make sure that it is not your opinion but a third party benchmark that underpins your valuation number.
Once you’ve made these valuations and totaled the number, simply compare it to all of your current debt. If your debt exceeds your total assets you are considered insolvent as per the IRS and you can proceed to file for bankruptcy (see form IRS 982).
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