Legal Question in Bankruptcy in Massachusetts

Re: Liabillity

I hate to sound like a lawyer, but the answer is, "It depends." There are two aspects to the answer: 1) did the business take orders knowing - or not caring - if it could fulfill those orders? and 2) to what extent has the corporation followed the requirements of a corporation? (annual meetings, annual financial reports, annual filings with the Sec of State Corporations Division, etc.) These go to fraud and "piercing the corporate veil", not really bankruptcy legal matters, but may lead to non-dischargeability and personal liability. Does the corporation have any assets, including receivables? Who are the officers/shareholders?

Unless there is a possibility of a Chapter 11, I do not usually recommend bankruptcy for the corporation, but would for the individual owner(s). A corporation does not get a discharge, but is in effect dissolved, and dissolution is preferable to bankruptcy in most cases.

I would also have to see the agreements for credit card payments and other credit contracts to see if you had agreed to be personally liable. It would be unusual for a small business owner to have a business that was in financial difficulty without him/herself being in financial difficulty in any event. If you have a separate source of income, you should beware of the changes effective on October 17 in terms of personal bankruptcy.

I would be available for consultation or to represent you. I do not give "free" consultations for business debtors. Someone has to pay for it. You will at least not be paying for yourself and someone else who got a "free" consultation.

Ray Bilodeau 508-766-1538

Re: Liabillity

The issues raised by your inquiry are very complex. In most circumstances, consumers who ordered product which was not delivered and could not obtain refunds, would in my opinion not necessarily have recourse to the corporation's principals. The would have a priority claim in an insolvency proceeding, but whether or not they could chase you personally would depend on the circumstances of the corporation taking the orders (ie. did you take orders that you knew or should have known had no possibility of being fulfilled). As to whether or not the liability could be discharged in a personal bankruptcy (corporation's do not receive discharges in bankruptcy and I would recommend another form of liquidation for the business in any event) would depend on whether or not the consumer could establish that the liability met one of the standards for non-dischargeability. Yes, if the debts are charged back and you have personally guaranteed the liability, you would be liable. Can this be discharged in bankruptcy, in all likelihood, yes. As you can see, the issues raised by your email do not lend themselves to the brevity of this reply. I would be happy to meet with you to discuss your business situation and develop an appropriate strategy for dealing with it. I do not charge for an initial half-hour consultation. Please call my office and I will give your situation the attention it requires.