To begin, it is important to point out that there are some very important differences between an individual bankruptcy and a corporation bankruptcy. When a corporation files a Chapter 7 Bankruptcy, the corporation WILL NOT receive a bankruptcy discharge. The bankruptcy discharge is what tells your creditors you are no longer liable for the debt you owed them. This means that the corporation will still be liable for all debts not paid off when the bankruptcy estate has been fully administered and closed. The other major difference to take note of is that corporations are not allowed any exemptions. This means a corporation cannot protect any of its property like an individual can. An individual is afforded very specific exemptions, or protections, for certain types of property or assets up to a specified dollar amount.
You are now probably wondering why a corporation would ever file for bankruptcy? Well, under certain circumstances, it may make a lot of sense for a corporation to become bankrupt.
For instance, it may give the corporations partners’ time to look for new employment or simply focus on more important matters. The main job of a trustee in a business bankruptcy is to basically close the business down and pay whatever he or she can to the corporation’s creditors. The trustee accomplishes this by gathering all of the corporation’s assets, selling them, and then distributing whatever funds he has been able to recover to the corporation’s creditors. If a creditor is not fully paid off, the corporation remains liable for the unpaid balance. This can be very helpful by taking the responsibility away from the corporation’s partners of closing the business down.
Regardless of the corporation’s situation, it is very important to first speak with an experienced bankruptcy attorney before filing bankruptcy. An experienced bankruptcy attorney can review the corporation’s recent business transactions, assets, and whatever else that might be relevant to help you determine whether filing bankruptcy is a desirable means in which to close your business’s doors.
If you do not wish to shut your business down, but are simply looking towards bankruptcy to help you get back on track, you can reorganize your debt with a Chapter 11 Bankruptcy.
If you are considering filing bankruptcy for your business and wish to speak to an experienced bankruptcy attorney, contact the Law Office of David M. Goldman, PLLC today for a consultation.