Business Bankruptcy and Social Media Accounts

Business Bankruptcy and Social Media Accounts

On April 3, 2015 it was decided that social media accounts may be deemed property of a bankruptcy estate.  The principle was confirmed in the bankruptcy matter known as In re CTLI, LLC (Bankr. S.D. Tex,. Apr. 3, 2015).   The facts of the case were that the Chapter 11 Business Debtor doing business as Tactical Firearms had a large and dedicated facebook and twitter following.  The majority shareholder and manager of Tactical Firearms relied heavily on facebook and twitter for business advertising, product demonstrations and personal social activity.

In bankruptcy court, the majority shareholder fought to personally retain the facebook and twitter accounts and even changed said accounts into his personal name post-bankruptcy filing.  To reach its decision the Southern District of Texas Bankruptcy Court applied 11 USC Section 541 which states in relevant part that a bankruptcy estate includes “all legal or equitable interests” of a debtor.  The Court reasoned that despite the co-mingling of personal and business use of the social media accounts, that social media accounts are property of the business similar to a subscriber or customer list.

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