The current pandemic crisis has had a major impact on the economy. It has affected businesses across the United States, forcing many to face the tough decision to file for bankruptcy. As the owner or operator of a corporation or LLC, you may be in this position yourself trying to figure out the best solution for your company. And while filing for Chapter 7 bankruptcy in this situation may not be as common, it is important to weigh the advantages and disadvantages to know if it is the right solution for you. The small business bankruptcy lawyers at CMC Law will utilize their unparalleled knowledge of the law to provide you deep insight and valuable guidance to get you through your filing with ease.
Bankruptcy Lawyers: Filing for Chapter 7 Bankruptcy as a Corporation or LLC
Small business bankruptcy lawyers will help you understand that filing for Chapter 7 bankruptcy as a business is a much different process than filing as an individual.
When corporations and LLCs are created, the secretary of state deems them as their own separate entity. As a result, the business is considered to own its assets, making it liable for its debts. In theory, this should help to protect investors and shareholders, but in certain cases, creditors can file a motion to make individuals liable for business debts. If you do not file the notice of disclosure paperwork properly or liquidate company assets correctly, it is more likely this can happen to you. As a result, it is crucial that you work with a small business bankruptcy lawyer when filing Chapter 7 bankruptcy for your corporation or LLC to ensure the process runs smoothly and to protect yourself.
When you file for Chapter 7 bankruptcy as a business, you will be required to cease operation immediately. A trustee will then sell off your corporate assets and reimburse your creditors as determined by the tenants of bankruptcy law. This eliminates the need for debt discharge.
So, when should you consider filing Chapter 7 bankruptcy for your corporation or LLC?
Chapter 7 Bankruptcy is Good for Providing Transparency
According to small business bankruptcy lawyers, the greatest advantage of filing for Chapter 7 bankruptcy as a business is that it proves the process strictly followed the law. Since some creditors worry about owners or operators diverting funds to avoid payment, this could prevent you from being litigated by creditors in the future.
However, based on your individual situation, this may not always be the case.
How You Can Still Be Liable for Debt After Filing for Chapter 7 Bankruptcy
When you file for bankruptcy with the help of your small business bankruptcy lawyer, you are no longer able to control what happens with your corporation or LLC. Once a trustee has been assigned to your case, they will dictate how the assets and business are sold to pay off the debt. While this can be beneficial for some companies, there are certain circumstances where this could actually leave you liable.
Those that are purchasing business debts look for discounts. As a result, your trustee could sell for a lower amount than you would, putting a smaller profit towards paying off the debt than if you had handled the sale with the creditors yourself. Also, in these types of bankruptcy filings, the trustee will receive a payment, which diverts proceeds away from settling the debt. If there is a debt remaining after the assets have been liquidated, you could be held personally responsible for paying the leftover amount.
Work with the Small Business Bankruptcy Lawyers at CMC Law Today
Filing for Chapter 7 bankruptcy as a corporation or LLC is an intricate and detailed process that has the potential for pitfalls along the way. As a result, it is critical to consult with small business bankruptcy lawyers to determine the best filing for your circumstances. Contact CMC Law to schedule your free consultation today.
At CMC Law, we have the tools and experience to help you through the most delicate of times.