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Does it Make Sense to file a Business Chapter 7 Bankruptcy?

Liviakis Law Firm

Understanding Chapter 7 Bankruptcy for Businesses

Businesses, like individuals, can find themselves in financial turmoil. One option available to companies is Chapter 7 bankruptcy, but it’s not for everyone. This article will explore the concept of Chapter 7 bankruptcy and whether it could be a viable solution for a struggling business.

What Is Chapter 7 Bankruptcy?

Chapter 7 bankruptcy, also known as liquidation bankruptcy, is a legal process that allows companies to discharge their unsecured debts, such as credit card balances and personal loans. The business assets are sold off (or liquidated) to repay creditors. After the process, the business typically ceases to exist.

Benefits of Chapter 7 Bankruptcy

Chapter 7 bankruptcy provides immediate relief to businesses struggling with overwhelming debt. The automatic stay provision halts all collection efforts, lawsuits, and wage garnishments. It gives a business the opportunity to start afresh without the burden of past debts. However, the decision to file Chapter 7 bankruptcy needs careful consideration due to its long-term implications.

Drawbacks of Chapter 7 Bankruptcy

The biggest downside to Chapter 7 bankruptcy is the liquidation of assets. The business is effectively dissolved, and its assets are sold to pay off debts. This can be a significant loss, particularly for businesses with substantial physical assets. Moreover, bankruptcy can impact the business’s reputation and relationships with customers, vendors, and employees.

Should Your Business File Chapter 7 Bankruptcy?

Deciding whether to file Chapter 7 bankruptcy is a significant decision that involves many variables. It could be the right choice if the company’s debts are insurmountable, and there’s no realistic prospect of recovery. Businesses that have few assets and those who wish to close down permanently may also find Chapter 7 beneficial.

However, businesses that believe in their potential to turn things around may want to consider other options. These could include negotiating with creditors, restructuring business operations, or opting for Chapter 11 bankruptcy, which allows businesses to continue operating while they restructure their debts.

Conclusion

While Chapter 7 bankruptcy can offer immediate relief and a fresh start, the implications are significant and far-reaching. Therefore, any business considering this path should seek the advice of a knowledgeable bankruptcy attorney. At Liviakis Law Firm, we can provide guidance and explain all your options. Call us at 916 459 2364 to schedule a consultation.

Our Office

Former Office
1215 K St

Sacramento, CA 95814

Phone: 916 459 2364
New Office
2377 Gold Meadow Way
#100

Gold River, CA 95670

Phone: 916 459 2364

Client Reviews

Mr. Liviakis is extremely knowledgeable and answered all of the questions that we had about our situation. He made a really difficult time manageable with his help and expertise. I would definitely recommend...

Lindsey Joyner

Mik is a great attorney. Very friendly & professional. Price is was bit high compared to other firms. Probably the highest I've seen. If price your thing, checkout other firms. Other than that, Mik will get the...

Oi Vinn

Mik helped us save our home and settle with creditors during the pandemic after we were forced to close our family business for over a year. I am forever grateful. He was kind and professional and followed up...

Jina and Steven Hale

Mr. Liviakis was timely and professional. He patiently answered questions and explained the process. He provided handouts that clearly outlined due dates. The firm's paralegal was very easy to work with. I...

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