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Attorney Bankruptcy Services

Business Bankruptcy

Whether to file business bankruptcy is one of the most frequently asked questions from our business clients.

This page is designed to answer common questions and explain common misconceptions about the realities of filing for business bankruptcy.

In order to determine the appropriate remedy for a business facing mounting debt and difficult creditors, the first step is to consider the type of business entity.

There are several different business entities that can be utilized to conduct business, such as:

  • Sole Proprietorships
  • Corporation - S-type and C-type
  • Limited Liability Company - LLC
  • Partnerships - Limited / General / Limited Liability

Business Bankruptcy - Sole Proprietorships / dbas / Individual Businesses

If the business is a sole proprietorship or husband and wife venture (meaning the business is NOT a corporation or a legally formed partnership), then it is NO different at all than yourself personally.

There is no legal separateness.

Thus, you need to look at the same options as you would for yourself personally (see information for Chapter 7, Chapter 13, or Chapter 11).

In this situation, if you "file for your business", then you file for yourself personally as well, because they are one and the same.

Business Bankruptcy - Corporations, Partnerships, and LLCs

If the business is a corporation (including a Limited Liability Company) or partnership, then you only have two (2) business bankruptcy choices.

Either Chapter 11, if you want to remain in business and reorganize the business' debt, or Chapter 7 if the business has or intends to stop operating and have its assets liquidated.

It is important to understand that a corporation does NOT receive a discharge of its debts in a Chapter 7 case.

So, why would a corporation file a Chapter 7 business bankruptcy case?

There are several benefits to doing so.

If there are assets to be liquidated, it allows for an independent trustee to sell the assets and pay the creditors whatever is received, in their proper priority. Essentially, it takes the corporation's officer(s) off the hook for doing this and limits their future liability in case any creditors complain about whether the assets were sold for the highest value, etc.

Another benefit is that it "informs" the creditors that there is nothing else to get from the corporation and the corporation is not going to be operating anymore.

This can prevent multiple unnecessary lawsuits against the corporation as the months and years go by.

Technically, the corporation's creditors can still sue the corporation even after the business bankruptcy is over, but it would obviously be pointless given that all assets have been liquidated by the Chapter 7 trustee.

One key concept that many people have difficulty understanding is this: Filing a Chapter 7 for a corporation does NOT eliminate the personal obligations of the corporation's officers or principals at all.

Therefore, if an owner, corporate officer or partner has signed a personal guarantee for a corporate debt, or is otherwise obligated for a corporate debt (such as trust fund portion of payroll taxes, credit card or vendor obligation), then he or she will remain obligated after a corporate Chapter 7 case unless, of course, the assets of the corporation are sufficient after being sold to pay 100% to the creditors to which the officer is personally liable.

So while there are benefits to filing a Chapter 7 for a corporation or partnership, relieving the officers of liability for pre-existing personal guarantees and obligations is not one of them.

Thus, if you are concerned about your PERSONAL obligations, you need to consider a personal bankruptcy (Chapter 7, Chapter 13 or Chapter 11).

In a general partnership, all partners are most likely personally liable for ALL of the partnership debts.

This is a bit more complicated than can be covered here, but the partners must consider individual bankruptcy filings to eliminate partnership debt in bankruptcy.

Moreover, in a limited partnership, limited partners may not have unlimited liability.

How Attorney Bankruptcy Services Can Help With Your Business Bankruptcy

At Attorney Bankruptcy Services, we assist companies and individuals with the resolution of business debt and business bankruptcy.

By carefully analyzing our client's individual needs, we create a custom-tailored strategy designed to meet our clients' objectives and protect valuable business and personal assets.

We work with all types of businesses. From sole-proprietorships to large corporations, we have assisted a wide array of businesses and individuals in resolving or restructuring debt.

Unsure if bankruptcy is the right step for your business?

Have questions about how best to continue to operate your business while eliminating or restructuring debt?

We will help you examine all available options and will assist you in determining if a work-out or bankruptcy is appropriate for you.

We can also negotiate with creditors to help you avoid small business bankruptcy.

Attorney Bankruptcy Services - Washington Business Bankruptcy

Attorney Bankruptcy Services represent Washington State individuals and businesses in Chapter 7, Chapter 13 and Chapter 11 bankruptcy cases.

We also represent individuals and businesses in bankruptcy litigation matters in the United States Bankruptcy Courts for the Western District of Washington at both Seattle and Tacoma.

Additionally, we represent debtors in all cities and counties throughout Western, Washington including but not limited to: Seattle, Tacoma, Everett, Bellevue, Kent, Auburn, Renton, Shoreline, Kirkland, Issaquah, Marysville, Lynnwood, Bremerton, Silverdale, Whidbey, as well as King, Pierce, Snohomish, Island and Kitsap Counties.

To receive a free consultation regarding your (or your friend or family member’s) debt problems, please contact us today at (206) 442-9500.

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