You may consider your social media accounts a form of recreation. Your Instagram feed or Facebook page is just a tool for entertainment and communicating with your friends and loved ones, right? However, if you are a business owner or Influencer, and you use social media accounts to advertise or promote your products, services, or brand, they may be considered assets during bankruptcy.

In May 2015, a Texas bankruptcy court ruled that social media accounts used to promote a business are considered part of a company’s bankruptcy estate. They also ruled that the business owner may be ordered to surrender their social media account passwords.

Are social media accounts considered an asset during bankruptcy or not? Can the trustee “seize” your social media account when you file bankruptcy? Theoretically, yes, the bankruptcy trustee can seize your social media accounts since there is no rule explicitly preventing a trustee from doing so. However, the bankruptcy trustee isn’t interested in anything unless it holds “value” that could generate funds to distribute to creditors. When considering whether your social media accounts may be considered an asset during bankruptcy, think about these factors.

Social media accounts have “low barriers to entry,” which means anyone can register a Twitter, Instagram, Facebook, etc. account for free, and it isn’t hard. According to business valuators, this low barrier to entry generally decreases the potential value of the “asset.” Another concept used by professionals to determine the value of assets is “personal goodwill,” which refers to an item (like an Instagram account) having value because of the person who owns the account and posts to the account. If the account were to change ownership, the value would significantly decrease. Many social media account without the original owner would hold minimal value.

If your social media account is used to promote your business, it could be seen as a “tool of the trade” and therefore qualify for possible exemption during a personal bankruptcy. There is precedent defining social media accounts used to promote a business as an asset of the company that can be sold in a bankruptcy. If a social media account is a source of income or a source of business, it may have value in the bankruptcy court’s eyes.

Most social media accounts are assets, but they are assets the bankruptcy trustee would not be interested in seizing because they have zero value. However, if a social media account is used to promote a business, and the business is sold, the accounts may go with the business. However, personal accounts used for personal use are unlikely to hold value in the bankruptcy court’s eyes. When determining whether your social media accounts are personal or business assets, the court may consider if the accounts: refer to the business, contain links to the business website, advertise the business, are designated as “business” pages or accounts on the social platform, include descriptions or bios about the business. If the court determines that your social media accounts are business assets, they will most likely be treated similarly to customer email lists.

If you are worried about filing bankruptcy because you don’t want to lose control of your social media accounts, we can help. Most bankruptcy offices in the Chattanooga area don’t have a single Consumer Bankruptcy Specialist on staff. Our office is the only one with two. Please get in touch. You are in good hands with Kenneth C. Rannick P.C.

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