The Short Answer
When you file personal bankruptcy in North Carolina — whether Chapter 7 or Chapter 13 — you must disclose information about any business you've owned 5% or more of in the past six years. The financial details required depend on how much ownership you have: if you hold 50% or more, you'll need business tax returns, profit and loss statements, and monthly balance sheets; if you hold less than 50%, your personal tax returns and a statement of your share of income or loss may be sufficient. This information isn't just paperwork — it helps your attorney determine how the business affects your personal finances and whether any equity in the business is protected before you file.
If you file bankruptcy, either Chapter 7 bankruptcy or Chapter 13 bankruptcy, you must disclose information about any business interest you have now, or have had in the past six years, where your ownership in the business is 5% or more. This includes disclosing the following information for each business:
Name and address of the business
Federal tax identification number
Beginning date of the business and ending date of the business, if appropriate
Names and addresses of any accountants or bookkeepers
Inventory taken for the business, if appropriate,
Partners, officers, directors and other shareholders as appropriate
Number of shares owned if incorporated or percentage ownership
You must also disclose financial information for any business you have had an interest in over the past three calendar years. This is required for an active, inactive or business closed during that timeframe. Depending on your interest in the business will impact what information is required.
If you have 50% or more ownership interest in the business, the following information is required:
Tax returns for the business, either Form 1120 or Schedule C, for the first two years is sufficient.
An income statement (often known as a profit and loss) and the most recent month’s balance sheet are required for the most current calendar year.
An income statement for each of the six months prior to filing bankruptcy, along with the income statement for the current month, is required.
If you have less than 50% interest the business, the following information is required:
Personal tax returns, which are already required, that shows your profit or loss in the business for the first two years.
A statement indicating your portion of the income or loss from the business for the most recent calendar year. This can be either an income statement for the business or a written statement, on company letterhead, indicating your profit or loss in the business and the most recent month’s balance sheet.
A statement indicating your portion of the income or loss from the business for each of the six months prior to filing bankruptcy.
This may seem like a great deal of information, but it is necessary to understand how the business impacts your personal financial situation. The most recent six months of financial information is used for the means test, if required. The balance sheet provides the equity in the business. It is extremely important that the equity in the business can be protected before filing bankruptcy. Your attorney will use this financial information to ensure bankruptcy is the right approach for you.
Key Takeaways
- Any business ownership of 5% or more — past or present, within the last six years — must be disclosed when filing personal bankruptcy.
- Owners with 50% or more interest must provide business tax returns, monthly income statements, and a current balance sheet for the past three calendar years.
- Owners with less than 50% interest can often rely on personal tax returns plus a written statement of their share of income or loss.
- Six months of pre-filing financial statements are required regardless of ownership level, because they feed directly into the bankruptcy means test calculation.
- The business balance sheet is critical — your attorney must confirm that any equity in the business can be protected by exemptions before your case is filed.
- These disclosure requirements apply whether the business is active, inactive, or closed during the relevant timeframe.
Attorney Insight
The mistake I see most often is business owners assuming their personal and business finances are completely separate for bankruptcy purposes — they're not. When a client comes in with even a small ownership stake in a business, we have to carefully analyze the equity on that balance sheet, because the bankruptcy trustee will. If the business has unprotected equity, filing without addressing it first can put that asset at risk in a Chapter 7 case. Taking the time upfront to gather complete financial records isn't bureaucratic box-checking — it's what keeps a straightforward case from turning into a complicated one.
