Chapter 7 business bankruptcies protect business entities, such as partnerships, limited liability companies (LLCs), corporations, and their owners as soon they file for bankruptcy. This is because the Automatic Stay allows businesses to dissolve without the harassment of their creditors. The Automatic Stay is an injunction to halt creditor actions, with certain exceptions, to collect debts.
Additionally, a Chapter 7 business bankruptcy lets the owners turn their business over to the trustee for an orderly liquidation. The business stops operating, and the court liquidates its assets and pays what it can to business creditors. When the liquidation is complete and the proceeds have been paid out to creditors, the business won’t owe any remaining debts.
However, many small business owners and sole proprietors signed personal guarantees for their businesses’ debts. Therefore, in these circumstances, the business owners will still be personally responsible for their business’ debts, unless they also filed a Chapter 7 personal bankruptcy at the same time as their Chapter 7 business bankruptcy.
When business owners signed personal guarantees for their businesses’ debts, the entire financial situation of both entities needs to be resolved at the same time by filing two Chapter 7 bankruptcies, one to discharge the businesses’ debts, and the other to discharge the owners’ personal guarantees.
Don’t make the mistake of filing a Chapter 7 business bankruptcy only to discover later that you are still personally responsible for your business’ debts. Call Bona Fide Bankruptcy for your no-cost, confidential consultation, at (480) 477-3208, or visit our website at https://bonafidebankruptcy.com/
Bona Fide Bankruptcy is an attorney-driven law firm that provides personal service to our clients. Let us help your business wind up and make certain you are not personally liable for your business debts. We are licensed in Arizona and practice law in Tempe, Phoenix, Scottsdale, Mesa, Chandler, and Gilbert.
*Our firm practices bankruptcy law and is considered a debt relief agency by federal law. We help people file for bankruptcy relief under the Bankruptcy Code.
**Disclaimer: This article provides general information and should not be taken as legal advice. Answers to questions or comments do not form an attorney-client relationship.