Who Should File For Chapter 7 Business Bankruptcy?
If you are a struggling small business owner, filing for a Chapter 7 bankruptcy ON BEHALF OF THE BUSINESS might help to eliminate business related debt and some government related debt. The choice to file a business related bankruptcy is highly technical in nature but if done correctly, keeping in mind both your personal and business liabilities it can be a good way to close that chapter in your life and set you up for your next business opportunity.
Why would you file Bankruptcy for an LLC?
In some states there is no advantage to filing a Business bankruptcy as the business can simply dissolve and the effect would be the same. Because of this, many attorneys simply never consider this option for their clients.
There may be advantages, however, based upon State law to filing a Bankruptcy for an LLC. For example, here in Washington State there are state specific statutes that would apply to an LLC that owes money to the government. Normally upon LLC dissolution that debt would drop to the individual members of the LLC and would NOT be dischargeable in a Ch. 7. There is a State specific statute, however, that says that if the LLC declares Bankruptcy and is subject to liquidation, the debt would not fall onto the individual members.
Because of this, it is important that attorneys verse themselves in the various options and strategies for closing down businesses or reorganizing businesses, and not simply ignore the potential advantages that Bankruptcy has to offer.