Can My Business Corporation or Limited Liability Company File A Chapter 7 Bankruptcy? Part 1
By Kevin Gipson, New Orleans Bankruptcy Attorney on Jan 13, 2008 in General Bankruptcy Information
As a bankruptcy attorney, I frequently see clients in my office that want to file a Chapter 7 bankruptcy for themselves individually as well as for a business corporation or limited liability company (LLC) that they may own. For the owners of most small businesses, this makes perfect sense because they frequently have personally guaranteed the business debts.
However, from time to time I will get a prospective client in my office that wants to file a Chapter 7 bankruptcy for their business only.
As fellow Bankruptcy Law Network contributor, Kent Anderson notes in his article: “Can A Small Business File For Bankruptcy?” while a small business can file for a Chapter 7 bankruptcy, the business, unlike an individual consumer debtor, cannot have its debts discharged at the conclusion of the bankruptcy.
This is an important distinction because the inability for a corporation (or an LLC) to get a discharge in bankruptcy means that the creditors of the business have the right to resume collection activities once the business bankruptcy is concluded.
So why would a corporation or an LLC want to file a Chapter 7 bankruptcy?
The answers to that question will be addressed in Part 2 of this article.
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