Law Offices of Nicholas Gebelt

Whittier Business Bankruptcy Lawyer

The other bankruptcy option available to a business besides Chapter 11 is Chapter 7. At the end of a business Chapter 7, the business ceases to exist. As a consequence, a business is ineligible for a Chapter 7 discharge because it doesn’t exist to receive a discharge. Therefore, Chapter 7 makes no sense if the business owners wish to keep the business alive.

In a Chapter 7, the Court appoints a Chapter 7 Trustee to liquidate the business and use the proceeds to pay creditors. Therefore, if the business has no assets, there is no point in filing a Chapter 7 because the Chapter 7 Trustee has nothing to do. In fact, some years ago one of the judges in the Central District of California sanctioned an attorney $30,000 for filing a Chapter 7 for a business that had no assets.

Why file a Chapter 7 for a business? This can make sense if the business has insurmountable debt, no hope of reorganization, and significant assets to be liquidated for the benefit of the creditors. If the business owners don’t want to take on the task of liquidating the assets and paying the creditors, they can put the business into a Chapter 7 and let the Trustee do all the work.

Important caveat: If the owners have personal liability for the business’s debts, and the creditors aren’t paid in full through the Chapter 7, they may still owe the unpaid creditors after the completion of the Chapter 7 case.

Have More Questions?

If you are unsure which option is best for your business, get help from a business bankruptcy attorney who is a board-certified specialist in bankruptcy law. Call the Law Offices of Nicholas Gebelt at (562) 777-9159 to discuss your options.

Attorney Nicholas Gebelt

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In light of the COVID-19 (coronavirus), we offer our clients the ability to meet with us via video conferencing and telephone. Please call our office at (562) 777-9159 to discuss your options. We are here for your legal needs now and in the future. Thank you.

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