If your company or business is so far in debt that it can’t continue business operations, consider business bankruptcy. Many different types of businesses can be good candidates for under Chapter 7 bankruptcy.
Business Bankruptcy: Chapter 7
Chapter 7 bankruptcy for a business requires complete liquidation of assets. All business assets (if there are any) will be sold for cash by a court-appointed trustee. After administrative and legal expenses, any remaining funds will go to creditors. Meanwhile, secured creditors will have their collateral returned to them.
If the company doesn’t have enough money to repay creditors in full, then the trustee will group creditors together in classes. The trustee will pay classes pro rata per claim. The court will notify any bondholders of the Chapter 7. All interested parties must file a claim in the case that a distribution takes place. Stockholders generally do not receive anything in return for their investments.
Why file a Chapter 7 for a business?
Businesses don’t get a discharge like consumer debtors. So why file a Chapter 7 for a business? Two important reasons.
First, filing a business bankruptcy may discourage creditor lawsuits. Business creditors often name business officers and shareholders personally in these types of suits. And creditors who feel short-changed can get very aggressive. Eliminating the “hassle factor” of lawsuits may lead to a filing.
And second, once a bankruptcy trustee assumes liquidation of the business, the business’s owners and officers can focus attention elsewhere. Liquidation can take many months to finalize, especially where the business has significant assets. Owners would rather move on to other opportunities than spend time on the the liquidation process. Retail and restaurants businesses fall into this category.
Business bankruptcy attorney serving DC, Maryland and Virginia
A Chapter 7 business bankruptcy can facilitate the final, orderly closure of your business. Call Lee Legal at (202) 448-5136 if you are considering a business bankruptcy in the Washington, D.C. area.