11 Jul Business Bankruptcy: the Basic Chapter 7 Process
1. Once you decide that a business bankruptcy is the appropriate remedy for your failing business, you must prepare a corporate resolution.
2. The bankruptcy petition is then prepared listing all of the assets and liabilities.
3. The business is closed. Employees are terminated, paid their final wages, all taxes are paid, and the doors are closed.
4. The bankruptcy petition is signed, filed and a trustee is appointed to administer the estate.
5. All assets are turned over to the trustee, including equipment, inventory, and receivables.
6. The trusteeâ€™s job is to return any secured property to the secured party and then sell or liquidate the rest of the assets for cash. Generally this is done at an auction or internet sale.
7. If there is a buyer for all of the assets, the trustee will, rather than hire an auctioneer to sell things on a piecemeal basis, consider such an offer. This is generally an as-is sale of everything. But it must be court approved, so a hearing will be held after notice to all interested persons. The judge will then take bids and sell the assets to the highest bidder.
8. The time between filing the bankruptcy and the appointment of a trustee is, generally, only a day.
9. The time between the trustee gathering the assets and getting everything sold depends on the extent of the property and the ease of a sale. It can take a week or several months.
10. Once the assets are sold, the money will be distributed by the trustee, first for administrative expenses, then to priority creditors, such as taxes and last to the unsecured creditors in proportion to the amount they are owed. That, too, can take several months while a proper accounting is prepared, taxes are filed and the trustee ensures that all creditors are include in the distribution.
11. The bankruptcy is then closed after distribution.
12. A business cannot receive a discharge; but is dissolved upon completion of the bankruptcy and, therefore, no longer exists.
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