If your small business is struggling to make ends meet, you may have considered filing a business Chapter 7 Dallas bankruptcy. Before you make any decisions, though, you should make sure you have all the facts about what happens in a business Chapter 7. A business Chapter 7 is a very different animal than an individual Chapter 7, and the differences can be very important, depending on your specific situation. Before filing, here are some things you should know.
How It Works
A business Chapter 7 is a dissolution arrangement; at the end of the bankruptcy process, the business will no longer exist. (There are a few exceptions to this, but the general rule is firm.) The business’s resources are pooled, assets are sold to cover outstanding debts, and remaining debts are discharged. The company ceases to exist. If your company is in the tank and you have no alternative, then business Chapter 7 bankruptcy may be the way out you seek. But if you think you can salvage some part of your business and turn things around, the business Chapter 7 will not be for you, as you would no longer be able to do business after the filing.
A business Chapter 7 for a small business (a sole proprietorship or partnership) discharges debts for which you are personally liable. However, if your company is an LLC or a corporate entity of its own, business Chapter 7 may not be applicable, as the debts are shouldered by the corporation and not by the individual. So the structure of your small business determines a lot about whether filing bankruptcy via Chapter 7 is feasible.