To most of us, social media accounts are recreational tools used to share life updates, photos, opinions, and other social commentaries. However, if you are a New York business owner declaring bankruptcy, then the Facebook, Twitter, and Instagram photos you use to advertise your products and services can be considered assets.
In May 2015, a Texas bankruptcy court ruled that any social media accounts used to promote a business are part of the company’s bankruptcy estate, and the owner can be ordered to surrender the passwords.
The case in question involved a Texas gun shop owner who filed for Chapter 11 on behalf of the company. A new owner took over as part of the reorganization plan, and the court ordered the original proprietor to turn over the passwords to the Twitter and Facebook accounts used to control the business. When he refused, he was held in civil contempt and sent to jail.
The owner argued that the social media accounts were personal and that sharing them would violate his privacy. The court, however, identified factors proving that they belonged to the business.
- Both accounts referred to the gun shop and contained links to the website
- Both accounts advertised the business
- The Facebook account was set up as a page instead of a profile
- The Twitter account profile included a description of the gun shop
The court likened social media business accounts to customer email lists:
- Both provided valuable access to current and potential customers
- Like unsubscribing from an email list, users can unfollow a Twitter account or unlike a Facebook page
The former gun shop owner remained in jail for over 45 days, stubbornly refusing to relinquish control of the Facebook and Twitter accounts. Finally, on May 27, 2015, he gave in and was released from federal custody.
While this individual is apparently the first debtor to be jailed in a standoff involving social media accounts, these assets are becoming increasingly central to business bankruptcy proceedings. The value of the virtual relationships between businesses and the public has been recognized, making it unlikely that social media tools will ever be treated only as private assets.
The million-dollar question is determining whether a Facebook or Twitter account is personal or belongs to a company. When the business is a smaller sole proprietorship, making that call can be difficult.
Contact a Bankruptcy Attorney
If you are a New York business owner planning to file for bankruptcy, then a bankruptcy attorney can help you determine whether Chapter 7 or Chapter 11 is the best approach for dealing with company debt. They will also advise you on what assets may be treated as part of the bankruptcy estate so that no unpleasant surprises await.
Jayson Lutzky is a personal bankruptcy lawyer with an office in the Morris Park neighborhood of the Bronx, New York handling Chapter 7 bankruptcy cases. If you are facing debt and are looking for a fresh financial start, then set up a free in-office consultation with Mr. Lutzky. He can help you determine if bankruptcy is the right path for you. Visit www.MyNewYorkCityLawyer.com to learn more or call 718-329-9500.