Chapter 7 Bankruptcy For Businesses
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Chapter 7 Bankruptcy for Businesses
Chapter 7, sometimes called “straight bankruptcy“, is a quick process where one files their case, surrenders any unprotected assets to the trustee (very rare), gets their discharge about three months later, and immediately begins rebuilding their credit.
It’s not only individuals who can benefit from debt relief through Chapter 7 bankruptcy; small business owners facing substantial business debt and cash flow issues may also file. If you are personally liable for debts in a general partnership or sole proprietorship, bankruptcy can discharge you from the debts. If your business is an LLC or corporation or another type of separate legal entity, you can file for bankruptcy on behalf of your business.
Bankruptcy Can Save or Liquidate Your Business
Chapter 7 bankruptcy can give you the means to either save your business from debt or liquidate it easily in addition to getting rid of your personal liability for the debts of your business. How bankruptcy affects business debts and continued operation depends on the type of business you have.
If your business is not a separate entity like an LLC or corporation and you are the only owner, you most likely are a sole proprietor which means you are personally responsible for all debts of the business. In this case, you will need to file for bankruptcy as an individual to discharge the debts. Business debts of a sole proprietorship are treated as personal debts and can be discharged through bankruptcy. This will also allow you to protect business assets with your exemptions to continue operating your business.
With a partnership, you are liable for debts if you are a limited (not general) partner. A partnership is a legally separate entity that must file a Chapter 7 business bankruptcy. Because business bankruptcy does not have exemptions or discharge, your business will be closed and liquidated to sell assets to pay creditors. If there are not enough assets to pay creditors, they can go after personal assets if you were personally liable for debts and the trustee may sue the general partners for remaining debts. If you are liable for any debts of the partnership, you may need to file a personal Chapter 7 to discharge debts you are obligated to pay.
Corporation or LLC
With an LLC or corporation, you are typically not liable for business debts unless you personally guaranteed any debts. Corporations and LLCs can file for Chapter 7 business bankruptcy but there is no discharge. The benefit of filing for Chapter 7 for an LLC or corporation is an easy and simple liquidation by placing the burden of liquidating and selling business assets and paying creditors on the trustee. You will still be responsible for any personally guaranteed business debts unless you file for a personal Chapter 7 bankruptcy.
Contact a Chapter 7 Business Bankruptcy Attorney in Las Vegas
If your business is struggling with substantial debt and you are considering bankruptcy, it’s important to understand your options and the limitations of Chapter 7 business bankruptcy when it comes to debts you are personally responsible to pay. A Las Vegas bankruptcy attorney can help you explore your options and decide if bankruptcy is the best option. Contact the bankruptcy lawyers at Vegas BK today to learn more about the benefits and drawbacks of Chapter 7 business bankruptcy.