Our company was recently evicted and we have too many debts. A lawyer said we can file for Chapter 7 bankruptcy and the business will go away, but so will the debts. We have around 50,000 in inventory, and around 150,000 in Debts, mostly loans from banks, but some taxes too. Can we file for Chapter 7 Business Bankruptcy? Also, do we need to do credit counseling beforehand or is that only for individuals?
Chapter 7 Bankruptcy Attorney
Credit counselling is required for all bankruptcy filers. As a business, you do not need to take the Means Test, however.
Hope this perspective helps!
When you say a "business debtor," if you mean an individual bankruptcy debtor with primarily business debts rather than primarily consumer debts, then yes, the pre-filing debt counseling course and subsequent financial management course are required. If the entity itself is being liquidated in a Chapter 7 bankruptcy, then no, the principal authorizing the bankruptcy is not required to file such a certificate as the entity is not an "individual" as defined by the Code. Keep in mind that even though the entity might liquidate in a Chapter 7 bankruptcy filing, if you are also personally liable, the bankruptcy for the entity will not provide you a discharge of the debts individually. In such cases, often times, the principal parties end up filing individual bankruptcy cases in addtion to the entity filing, and of course each individual would be required to take these classes.
The information provided herein is for general informational purposes and not to be relied upon as a substitute for legal advice with regard to your unique set of circumstances. Futher, the answer provided herein does not establish an attorney-client relationship and I would advise any contemplating a bankruptcy to meet with a qualified attorney licensed in their respective geographical location.
You didn't say if your business is a corporation of some sort of a sole proprietorship. If the latter, there is only one entity, you (and presumably your spouse), to file the Chapter 7. If the business is a corporation and your business debts were personally guaranteed by you, then you'll probably need to do a personal bankruptcy to avoid those debts. Whether you also need to do a bankruptcy for the corporation is another question. Your corporation cannot get a discharge of its debt in a Chapter 7, and its assets would be liquidated to repay its creditors. Some people opt to simply wind down the business and avoid the cost of a corporate Chapter 7, while others want the "closure" it provides regarding future hassles from corporate creditors. If you should decide to do a corporate bankruptcy, make sure you file it prior to filing a personal Chapter 7 or else you will not have the authority to file the corporate Chapter 7 because the trustee in your personal Chapter 7 will have control of your corporation. Who said this stuff is simple... I strongly recommend that you consult with a qualified bankruptcy attorney in your area.