Are Social Media Profiles Considered Assets In A Bankruptcy?
There was a recent article published where a judge in Texas ruled that a debtor turn over passwords to a Facebook and Twitter account as part of his business’ bankruptcy.
While the debtor saw these as his personal social media accounts, the creditors viewed them as an asset of the bankruptcy.
The case sparks interest around the topic, and you may yourself be wondering, Are Social Media Profiles Considered Assets In A Bankruptcy?
The answer to if you’ll lose your Facebook, Twitter, LinkedIn, and other social media accounts if you go bankrupt in Canada is “probably not.”
The process of personal bankruptcy is quite an easy matter to understand when broken down.
Your assets are sold, and the proceeds are then distributed to your creditors. In exchange, your debts are forgiven.
Although an easy concept to understand, it’s not always that simple in the real world.
Some bankruptcy exemptions exist so that you’ll be able to keep specific assets that aren’t very valuable.
- Basic household furniture.
- Personal effects (like clothing).
- A vehicle valued at less than the allowable exemption limit.
- RRSPs and tools of the trade.
Most of what you own will likely fall into the exemption category unless you have some very valuable possessions.
Social Media Accounts
Another layer to bring into the mix is that of your social media accounts.
You may be wondering to yourself, is a Twitter or Facebook account an asset in a bankruptcy.
Will the trustee seize it, and will I lose control over them?
The answer is yes, in theory.
That is if your social media accounts have value.
As it stands, no rule prevents a trustee from taking over those assets.
The question and factor to ponder is if your social media accounts have any monetary value associated with them.
For instance, is someone else willing to purchase them?
If all you do is post pictures of your meals and family to your short-list of followers, then it’s not likely anyone would want to buy the accounts from you.
Although it’s an asset, there’s zero value associated with it, and therefore your trustee won’t seize it.
When Social Media Accounts do Have Value
However, there are other instances when social media accounts may have a monetary value associated with them.
For example, what if you are a chef at a popular local restaurant and you post pictures of each meal you prepare to your thousands of followers?
In this case, your social media accounts might have some value.
An owner of a competing restaurant in town may consider paying money to take ownership over that account.
On the other hand, the competing chef can purchase the account but then choose not to post to it.
They can start a new page for free, and it wouldn’t be long before all the followers would find the new account.
Personal or Business Asset
Then there’s the scenario where a small business owner uses social media to send tweets about his or her company’s products, services, sales, and other events happening to a large audience of customers.
Then the question becomes, is this account a personal or a business asset?
It’s important to note that business valuators identify social media accounts as “low barriers to entry.”
It means that anyone can essentially create a new Twitter, Facebook, or Instagram account at no cost.
The value of these accounts may be reduced in value because the low barrier to entry makes it easy for anyone to possess one.
Based on speculation only, it could be argued that a Twitter account that’s used to promote a business is a “tool of the trade.”
Therefore, it may be exempt.
It’s not definite because no one has ever gone to court to argue over the value of a social media account in a personal bankruptcy in Canada.
Another viewpoint could be that a social media account is a personal asset.
In turn, it can be covered by the exemption for personal belongings.
Another concept to be aware of that business valuators use is “personal goodwill.”
What this means is that a Twitter account can have value because of the person using it.
People want to see what famous individuals are sharing and talking about on Twitter.
If someone else took over an account of a famous person, it would instantly lose its value and worth.
Without the specific person sharing their ideas, there is no personal goodwill.
For all these reasons, if you do go bankrupt, it’s highly unlikely that a trustee will take your Twitter, Facebook, and Instagram accounts away from you.
These social media accounts have zero value without you since they’re based on you and what you do on them.
Keep in mind that social media is always changing and evolves very quickly.
It’s possible that in the future that additional forms of social media will be invented and that they could have transferable value.
As of how it stands and works today, it seems this value only exists for businesses and not people.
In the U.S., there are cases where a Twitter account is used for business and therefore becomes an asset of the company.
It can then be sold in a bankruptcy.
It’s similar to a website domain that a business owns.
The domain name can be an asset in a bankruptcy if it has value.
If the Twitter account is a source of business, it may also have value to the business.
Generally speaking, if you use your social media accounts for business then your account may go with the business if you sell your company.
However, if you’re using your accounts for personal use only then, it’s probably that in a personal bankruptcy your social media accounts will have little to zero value.
Do you have further questions about bankruptcy and finding alternatives to paying down your debts?
Get in touch with us today at Bankruptcy Canada, and we’ll walk you through your options.