What happens to my business if I file bankruptcy?

Should I File Bankruptcy for  My Corporation?

 

If you are thinking about winding down your incorporated business, there are two approaches you can take: (1) cease operation, liquidate all the business assets, and dissolve the corporation; or (2) file a Chapter 7 bankruptcy for the corporation.

Usually, when a corporation has some assets that need to be liquidated in the process of winding down, some people file bankruptcy for their corporation (as opposed to winding down the business on their own) even though, unlike individual debtors, corporations do not get a discharge in bankruptcy. One advantage to filing bankruptcy for a corporation is that it may discourage lawsuits from creditors because they know
that a trustee in bankruptcy will be administering all the property of the estate, including the assets of the corporation.

 

 

The information contained on this site is for general education only and it is not, nor is it meant to be, legal advice.  You should seek advice from a bankruptcy attorney for your specific situation.

 



Can I Keep My Business after I file Bankruptcy?

 

Yes, in most cases, small business owners (whether it’s a sole-proprietorship or an incorporated business) can seek bankruptcy protection while continuing to operate their business by filing under Chapter 13 (as opposed to Chapter 7).

Here is why Chapter 7 bankruptcy is generally considered a bad idea for business debtors. After you file your bankruptcy, your business becomes an asset of the bankruptcy estate and thus it can be sold or distributed to pay creditors in a Chapter 7 bankruptcy. Furthermore, due to the liability issues of an operating retail space, sales tax liability, or unpaid wages, etc., you may not be able to keep operating the business while it is still an asset of the bankruptcy estate (i.e. while your Chapter 7 case is pending).

By filing a Chapter 13 bankruptcy, you can continue to run the business, and use the proceeds to fund
a Chapter 13 plan to make your plan payments and eventually wipe out your debts.

 

 

The information contained on this site is for general education only and it is not, nor is it meant to be, legal advice.  You should seek advice from a bankruptcy attorney for your specific situation.