Bankruptcy is a form of debt relief available to U.S. individuals and businesses alike, and while there are several versions of reorganization or liquidation bankruptcy, the overall goal of giving debtors a viable opportunity for financial recovery remains the same. If your limited liability company (LLC) or corporation chooses to file for bankruptcy, you can take advantage of the benefits a reorganization case provides through Chapters 11, 12, and 13, or you can liquidate your assets and receive debt relief through Chapter 7. With the advice and guidance of Behm Law Group, Ltd., you can choose the right type of bankruptcy in Luverne, MN, for your business and file a successful case for long-term financial stability.
While reorganization bankruptcy is an effective option for high-income businesses dealing with equally high debts, the best choice for businesses struggling to stay above water may be a Chapter 7 liquidation case. Chapter 7 bankruptcy is the most common format for individual bankruptcies, but because of the differences in how a case is handled for corporations and LLCs, this process can also be a viable option for companies going out of business.
For individual consumers, Chapter 7 bankruptcy works to liquidate non-exempt assets (properties including anything from homes and vehicles to jewelry and appliances the values of which are in excess of your applicable bankruptcy exemptions) and discharge many of their debts in return (including credit card debts, medical bills, mortgages, car loans, and more). In a Chapter 7 business case, the debts of the business are also discharged. However, in a business Chapter 7, the business does not have the benefit of asserting bankruptcy exemptions to protect at least some assets. Instead, the bankruptcy trustee will generally liquidate all business assets and use those funds to repay at least some dividend to creditors. When this process is accomplished, the business usually closes. Regardless of whether the business closes or stays in operation, its debts are discharged just as in an individual Chapter 7 and its creditors are unable to legally collect the discharged debts from the business.
Time and Place
An LLC or corporation might choose to file for Chapter 7 if they’re ready to close down and cut their losses. For example, if a technology company’s product becomes obsolete and they can’t alter their production to fit the changing market, the owners of that company can benefit from filing for Chapter 7. A company may also choose to file for Chapter 7 to stop creditor harassment and alleviate concerns of fraud that may lead to lawsuits.
On the other hand, it may not be time to file for liquidation bankruptcy if the majority of your business debts will become personal liabilities after filing—debts you’ll be responsible for even after your business is closed. The types of business debts that are considered personal liability after bankruptcy include trust fund taxes, alter ego claims, and fraud claims and debts of the business for which you may have signed personal guarantees. Sometimes, one needs to file a business Chapter 7 bankruptcy and, thereafter, file an individual Chapter 7 bankruptcy to discharge debts of the business that one personally guaranteed.
f your corporation or LLC is failing to meet debt payments and gain steady revenue, Chapter 7 bankruptcy might be the right step to take. Contact Behm Law Group, Ltd. at (507) 387-7200 to start your case today and get the most out of filing for bankruptcy in Luverne, MN.