Can a business retain ownership after filing under Chapter 7?

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There are a lot of things that a business owner needs to keep in mind, no matter how successful or unsuccessful they are. At some point, for instance, you will have to worry about how your severance packages are going to be set up for any workers that you have to lay off. Another concern you may have, a concern that is significantly greater, is the process involved in filing for bankruptcy. There are multiple ways that a person can file for bankruptcy for their business, and the one we will be discussing today is filing under chapter 7. Namely, one of the concerns people have is whether they are able to retain their business while filing under chapter 7. But before you do anything you should always consult a business bankruptcy lawyer. 

What is chapter 7 bankruptcy?

When people think of bankruptcy, they often are not able to tell the difference between the different kinds. When it comes to the various kinds that you can pursue, there are some intricacies to them that you should understand before pursuing any form of bankruptcy. Some will be better for you than others, but this all depends on the who, what, and why. The who depends on your circumstances. For example, if you find yourself struggling, living paycheck to paycheck, chapter 7 is likely one of the better options for you, as the liquification of your assets that occurs when you file under chapter 7 lightens up your burden. For some people, dealing with your existing debts and avoiding creating new debts are just not things that you can reasonably do. You leave your debts alone to avoid creating new ones, and the old ones worsen. You disregard the creation of new debts to pay off old ones, you’re right back where you were at the beginning.

Once you have successfully filed for chapter 7 bankruptcy, it offers you the benefit of not having to worry about getting bothered by creditors day in, day out. Immediately upon filing, creditors are required to cease any attempts to collect on your debts, including garnishing your wages or contacting you in any way. It can also be used to recover a driver’s license lost due to unpaid debts and prevent your utilities from being turned off due to non-payment. Once you’ve filed, however, you have to make note to continue paying your debts, as this merely gives you a cleaner slate than what you started with. If you are at risk of being foreclosed upon, have property repossessed, or evicted from your home, this will provide a temporary stay that prevents these things from happening. Do make note, however, that this will not erase all of your debts. Credit card debt, medical bills, personal loans, older tax debt, and other things are covered by chapter 7 bankruptcy; yet, there are non-dischargeable debts that will not be covered through this method. These include mortgage loans backed by your vehicle(s) or home(s), and thus will have to continue paying your payments in order to keep them.

What is the risk of filing under chapter 7 bankruptcy?

While there are some advantages as discussed above, there are disadvantages to it as well. Perhaps the most concerning issue you may face is the items that are non-exempt from being seized as part of the liquidation process. And for business owners, the sad thing about filing under chapter 7 bankruptcy for your business will not end well when it comes to retaining it. Chapter 7 bankruptcy is certainly not meant to be the first resort that a business owner should take when filing for bankruptcy. Rather, you should try to explore other options before you take this, as once you file under chapter 7 bankruptcy for your business, your business cannot continue operation as a rule. Furthermore, it must be said that liquidating your business as an asset to cover your debts is not necessarily the end of your debt woes when it comes to your business. For example, if you offered a guarantee for any debt relating to your business, you are still liable for covering said debt. In order to make sure that chapter 7 bankruptcy is the right approach at this time, you should certainly consult an attorney with the relevant credentials before doing anything severe.

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