When profits decline or expenses rise, some Tennessee businesses may struggle financially. If you are a business owner experiencing these types of challenges, you may have considered filing for bankruptcy. At Rothschild & Ausbrooks, PLLC, we are often asked about the debt relief options available to businesses. In this post, we will discuss Chapter 7 bankruptcy filings for businesses.
As a business owner, declaring Chapter 7 bankruptcy is best if you plan to stop all of your company’s operations. This is because, like with individual filings, Chapter 7 for businesses requires your company’s assets to be liquidated, according to the U.S. Securities and Exchange Commission. Therefore, the court will appoint a bankruptcy trustee to your case. The trustee will sell off your business’ assets. The proceeds from those sales will then be applied to your debts.
With few exceptions, unsecured debts that remain unpaid after your assets are liquidated and sold are discharged and forgiven. These debts include those owed to consultants, suppliers and professionals, as well as residential or commercial property leases. Equipment rental leases may also qualify as unsecured debts during Chapter 7 bankruptcy filings.
In general, secured debts are handled differently than unsecured debts. Since you have put up property as collateral for these debts, the lender may choose to take the property to secure the loan. This may happen even if you file for bankruptcy. In cases when you owe more on your debt than your collateral property is worth, then collateral may be taken back and the difference may be discharged.
For more information about liquidation bankruptcy for businesses, please visit our Chapter 7 bankruptcy page.