Filing Bankruptcy for Corporation as Opposed to Owner
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Business bankruptcy can be a perplexing proposition. As a business owner, you may not know whether you need a full or reorganization bankruptcy. The advice of an experienced business bankruptcy attorney can help you better understand the differences between the two types of business bankruptcy and help you determine which type of bankruptcy filing is best for your business and personal situation.
Debtors who file for Chapter 7 bankruptcy will get a discharge that relieves them of liability for many debts, including credit cards, personal loans, and medical bills. There are some exceptions, such as some taxes and domestic support obligations, however once non-exempt assets have been liquidated, the debtor will get a discharge and a financial fresh start. Corporations that file for bankruptcy will commonly have a different outcome.
A business will not typically get a discharge in the same way an individual does. Instead, assets will be liquidated and the company will be dissolved. Filing for bankruptcy simply provides an orderly framework upon which this to occur, and it ensures that creditors are paid through the liquidation of assets.
Those who file for bankruptcy as a corporation have two choices: Chapter 7 and Chapter 11. Corporations are not eligible to file for Chapter 13 bankruptcy. Chapter 7 bankruptcy is a liquidation bankruptcy and the most common form of business and personal bankruptcy in the U.S. today. If you are going out of business, a Chapter 7 bankruptcy will dissolve your assets and use the proceeds to pay your creditors. In some conditions, this is done because of financial hardship. In other conditions, a company's creditors file for Chapter 7 bankruptcy on behalf of the company. When the bankruptcy petition is filed, a court-appointed bankruptcy trustee will begin liquidating, or selling, the company's assets.
In some cases, a business owner who files as a sole proprietor may be qualified to get a discharge of his or her debts. When a business files for bankruptcy, it should include all its business debts, which may, in some conditions, be connected with a business owner's personal finances. A sole proprietorship's assets, business equipment, and other property then become a part of the business estate and may be eligible for liquidation unless they are considered exempt. The business owner's personal property may also be considered in the bankruptcy proceedings, and his or her personal assets may be considered part of the bankruptcy estate. However, bankruptcy exemptions, including the homestead exemption and personal property exemption, can protect a percentage of this personal property.
Finally, a small corporation or LLC may be facing more issues in bankruptcy court as he or she loses control of the business he or she worked so hard to build. Even though the bankruptcy will dramatically end the business and liquidate the assets, this can also be accomplished in other ways as well. Many small business owners decide instead to dissolve their businesses and file for personal Chapter 7 or Chapter 13 bankruptcy instead.
Article Source: Articlelogy.com
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