Chapter 7 Bankruptcy for Atlanta, Georgia Small Business OwnersFebruary 12, 2013 | Category: Chapter 7
In my 27 years as a Georgia bankruptcy lawyer, I have been consulted hundreds of times to file Chapter 7 bankruptcy cases for incorporated small businesses, but I can count on one hand the number of those cases that I have actually filed with the court. That’s because these privately owned corporations, usually “mom and pop shops”, often times don’t need to file for bankruptcy… but their owners may very well need to.
There are good reasons for incorporated small businesses to avoid the bankruptcy court’s harsh scrutiny. A corporate Chapter 7 case shuts the business and liquidates all of the business’s assets, effectively dissolving the corporation on the Court’s terms, not on the owner’s terms Moreover, payments, including those that were made by the corporation in prior years to benefit its owner, that might have been otherwise permissible might violate bankruptcy law and be subject to reversal after a bankruptcy case has been filed.
Certainly, there are circumstances in which the incorporated small business might need to file a Chapter 7 case, such as when creditor harassment becomes burdensome; or when there needs to be an orderly court administered liquidation of assets, for instance, to stop foreclosure proceedings against property with equity that could otherwise be used to satisfy unsecured debt.
Frequently, however, the owner is personally subject to suit because the owner is personally obligated on the corporate debts by virtue of having co-signed for, or guaranteed, the debts. That’s because most creditors won’t extend credit to the small business alone; and when things go sour, at least the owner remains “on the hook”. A corporate Chapter 7 bankruptcy filing will not protect these owners. Therefore, in many cases, a Chapter 7 bankruptcy filing for a business’s owner, coupled with reorganization of business operations outside of bankruptcy, may accomplish the goal of alleviating debt and allowing an individual to continue to operate his or her business free of debt. Alternatively, if the business simply can’t pay its debts, it usually can tie up its affairs and stop transacting business. If the business is sued, there may be little, if anything, that the creditor can do to collect.
Since 1986, The Rothbloom Law Firm has represented small business owners in Atlanta, Georgia seeking relief from their corporate and personal debts. Our attorneys are experienced at analyzing whether business owners or their corporations should seek Chapter 7 relief. Contact us today to discuss whether bankruptcy may help to eliminate small business debt.