Legal Question in Bankruptcy in California

Re: Firm Bankruptcy

You may have to pay a portion back or have it restructured. The BK provides different forms of protection. To determine which one is right for you call for a consultation.

Re: Firm Bankruptcy

Unfortunately, corporations do not get discharges in bankruptcy, only people. Also, customarily, the principals of the corporation sign personal guarantees for the debts of small corporations anyhow (you may not realize that you were responsible at the time the credit lines were initiated). There is no way to get rid of the debt, save for working out a payment plan. If you file a BK for the corp., the debt will likely be pursued against the officers. Also, if the corp files BK, all the assets of the business must be surrendered to the trustee, who will try to market whatever there is to payoff the creditors. You may wish to consider a reorganization bankruptcy which will allow you to operate the business and pay off the debt over time. You should seek debt counseling at the earliest opportunity.

Re: Firm Bankruptcy

While you might be able to restructure the debts with a Chapter 11 bankruptcy, Chapter 11 tends to be very expensive. Corporations do not receive discharges in bankruptcy. And even if you bankrupt the corporation and shut it down, that does not eliminate the potential for personal liability of the shareholders. It is quite common for shareholders in small businesses to sign personal guarantees for corporate debt.

If the corporation files for Chapter 7, the trustee will liquidate all of the corporation's assets to pay creditors, including receivables. You will lose control of the business.

The type of bankruptcy will ultimately depend on getting a global picture of your personal financial situation as well as that of the corporation. Feel free to contact me office for a consultation.

Re: Firm Bankruptcy

If you close down (liquidate and wind down the corporation), there will be nothing there for the creditors to go after; but you may find, as noted elsewhere, that you are personally responsible for the debt(s).

Whether you can file a Chapter 7 to discharge your personal liability depends on several factors such as your family's average gross income per month and whether you have non-exempt equity in assets you wish to retain. Unfavorable responses to such questions may require you to file a Chapter 13, instead, where you would probably pay back some of those debts over a 3-5 year period.