Should Your Corporation or Limited Liability Company File Chapter 7 Bankruptcy?

Posted on September 23, 2009. Filed under: Uncategorized |

A good blog post by Charleston Bankruptcy Lawyer Russell A. DeMott:

http://www.bankruptcylawnetwork.com/2009/09/22/should-your-corporation-or-limited-liability-company-file-chapter-7-bankruptcy/

I generally agree with his comments, and would add one experience I had in practice  that would merit strongly against not putting a corporation in Chapter 7 Bankruptcy.  If a corporation files Chapter 7 bankruptcy, then that filing could give zealous creditors the opportunity to challenge any transfers that the corporation made to “insiders”, such as directors, officers, and or owners of the corporation.  If the corporation was allowed to simply “die its own death”, so to speak, and not file Chapter 7 bankruptcy, then the creditors would not have the convenient forum of the bankruptcy court to challenge those transfers, and the attendant bankruptcy code that may support their argument.  Something to think about !

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One Response to “Should Your Corporation or Limited Liability Company File Chapter 7 Bankruptcy?”

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Great additional point, John. If you file the corporation or LLC, be sure factor in preference issues. Sometimes it may be good to file so recover the preferences (for example, if general unsecured creditors are paid prior to filing and you want to get the money back to pay priority tax debt the owners might be liable for), and sometimes you might not want the negative consequences of filing.

Great blog, by the way!


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