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Who Owns The Facebook Account In a Bankruptcy?

If you file for personal bankruptcy in Massachusetts, do you have to list your Facebook account as an asset?  Is there a distinction between your personal account and the business account for small businesses?

Texas Bankruptcy Judge Orders Facebook and Social Media Accounts Passwords

When a Texas gun business filed for bankruptcy protection, the judge sold off the assets of the business.  However, there was a disagreement as to who owned the social media accounts of the business.  Jeremy Alcede, the 70% owner of the business claimed that he owned the Facebook and other social media accounts and refused to provide the passwords or to turn over the accounts to the new owner.

Mr. Alcede, notorious for ranting against the government, and especially President Obama, was ordered to turn over the accounts to the new owner.  He refused, claiming that they were his personal accounts, and Judge Bohm had Mr. Alcede incarcerated in federal prison.  While “the landscape of social media is yet mostly unchartered in bankruptcy,” an Order of the Court is not.  The judge reasoned that the account postings had “the objective of increasing gun and ammunition sales.”  As such, the Facebook account is “related to the debtor’s business and were issued with the purpose of generating publicity for the business…” and therefore an asset of the business, not a personal asset.

Do Social Media Accounts Have to Be Listed In Bankruptcy?

Clearly, in a personal bankruptcy, you need to list all your assets.  If you believe that a Facebook, Twitter or other social media account has value, you need to list it as an asset.  Most personal bankruptcies do not have such social media assets.  However, if you run a small business which has “followers” that could be considered a customer list.  If it has value – if someone in a competing business would pay for it – it is an asset and should be listed as such.  We advise clients to list everything, and to have documentary proof as to the value.  Then we make sure that we can find a legitimate exemption for that asset.

Many small businesses these days do have social media accounts.  Business documents need to be drawn up clearly as to who owns what so that if the business files for bankruptcy, there are clear distinctions.

Was Mr. Alcede the owner of the social media accounts?  We don’t know.  The Court in Texas says he was; he says he wasn’t.  This issue will be sorted out in cases to be handed down by the various bankruptcy courts and appellate courts in the US.

Retain an Experienced Bankruptcy Attorney

When you attend the Trustees Hearing in the Bankruptcy Court, you want to be sitting with an experienced Massachusetts bankruptcy attorney on your side.  You want to have that attorney to already have communicated with the Trustee regarding everything the Trustee needs to substantiate your assets and income.  You want that hearing to go smoothly.  You want as little follow up as necessary.  You want the next 60 days, before discharge, to be devoid of any legal proceedings.

Call Attorney Neil Burns.  He’s experienced.  The initial consultation is free.  617-227-7423.


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