Legal Question in Bankruptcy in Wisconsin

Sadly, your situation is far too common during our current national recession. Although I would need to know much more before I could advise you, in cases of total failures of family small businesses, the family owners are usually the ones who first retain me to represent the owners rather than the corporation. This is because the corporation may not really have much of an existence if the owners cease to work for it. This is because its sole corporate asset of any net value is often the services of the family owners.

Since it is not possible for a single bankruptcy filing to cover both an individual (or married couple), and a corporate entity, one is forced to decide which entity should file first (or even whether or not the corporate entity needs to file at all). Often, there is nothing left to save in the corporation, while the owners still have valuable assets to protect. In that scenario, I therefore often end up filing the personal bankruptcy first. Since a bankrupt corporation cannot get a discharge in chapter 7 in any event, filing a bankruptcy under that chapter often yields little or no net benefit and can even cause problems for the owners, since a bankruptcy trustee will immediately scrutinize the owners over the issue of whether or not they managed it in good faith. An independent trustee may potentially even sue the owners personally if there is doubt about whether their recent management decisions were more in their personal interests than in the best interests of the corporation.

On the other hand, in chapter 11 corporate reorganizations, the debtor in possession ("DIP") can include current management, including family owners, for a short initial period. Such cases, however, are generally far too expensive to be practical for most small family businesses. Instead of any bankruptcy proceeding for the corporate entity, therefore, a simple liquidation through the WI regulatory agency which oversees corporations often makes more sense than a bankruptcy if the business has no value as a going concern. My comments in this online forum are not intended as legal advice to anyone, nor do they create an attorney client relationship between us, unless you subsequently retain me and revisit the issue with me later.

Sadly, your situation is far too common during our current national recession. Although I would need to know much more before I could advise you, in cases of total failures of family small businesses, the family owners are usually the ones who first retain me to represent the owners rather than the corporation. This is because the corporation may not really have much of an existence if the owners cease to work for it. This is because its sole corporate asset of any net value is often the services of the family owners.

Since it is not possible for a single bankruptcy filing to cover both an individual (or married couple) and a corporate entity owned by them, one is forced to decide which entity should file first; or even whether or not the corporate entity needs to file at all. Often, there is nothing left to save in the corporation, while the owners still have valuable assets to protect. In that scenario, I therefore often end up filing the personal bankruptcy first. Since a bankrupt corporation cannot get a discharge in chapter 7 in any event, filing a corporate bankruptcy under that chapter often yields little or no net benefit and can even cause problems for the owners, since a bankruptcy trustee will immediately scrutinize the owners over the issue of whether or not they managed it in good faith. An independent trustee may potentially even sue the owners personally if there is doubt about whether their recent management decisions were more in their personal interests than in the best interests of the corporation.

On the other hand, in chapter 11 corporate reorganizations, the debtor in possession ("DIP") can include current management, including family owners, for a short initial period. Such cases, however, are generally far too expensive to be practical for most small family businesses. Instead of any bankruptcy proceeding for the corporate entity, I therefore often opt for a simple voluntary liquidation through the WI regulatory agency which oversees corporations. This often makes more sense than a bankruptcy if the business has no value as a going concern. My comments in this online forum are not intended as legal advice to anyone, nor do they create an attorney client relationship between us, unless you subsequently retain me and revisit the issue with me later.