Sacramento Bankruptcy Attorney discusses when it may be appropriate for a corporation to file for Chapter 7 Bankruptcy
Sacramento Bankruptcy Attorney discusses when it may be appropriate for a corporation to file for Chapter 7 Bankruptcy
For individuals, filing for bankruptcy under Chapter 7 means a fresh start and a discharge of nearly all debts. Unfortunately for a corporation, a Chapter 7 bankruptcy filing does not provide the same relief because its debts will not be discharged. This means for many struggling corporations that it is in the officers and majority shareholders’ best interests to just sell the remaining assets (if any), close the doors, and walk away. However, a Chapter 7 bankruptcy can be helpful under the following circumstances:
1. If there are a significant number of assets to be liquidated, officers may want to file for a Chapter 7 bankruptcy in order to benefit from the services of a Court appointed trustee. The trustee will then be responsible for liquidating the assets and relieving the corporate officers from the burden of finding buyers and organizing sales.
2. Filing for Chapter 7 bankruptcy can also protect officers and shareholders who have personally guaranteed the corporation’s obligations, such as leases, certain types of taxes, etc., from creditors who are looking to levy or put liens against assets that could be sold to pay off debts.
3. Creditors may also try to pierce the corporate veil and name officers and/or shareholders in lawsuits to obtain payment, even though they are not personally liable to repay the corporation’s debt. If the corporation believes it is likely to be facing numerous lawsuits from litigious creditors, a Chapter 7 filing will generally protect the officers and shareholders from personal liability.
If you have a question regarding Bankruptcy please contact Sagaria Law at 1-800-941-6730 for a free consultation or visit us at www.sagarialaw.com. Our team of Bankruptcy Lawyers can assist you with all aspects of your case. If you are have questions about filing a chapter 7 bankruptcy, a chapter 13 bankruptcy, lien stripping, discharging debt, etc. we can help! We have bankruptcy attorneys in San Mateo, Fremont, Sacramento, Roseville, San Francisco, Salinas and San Jose.
