QUESTION
Should a 501c6 organization with less than $20,000 debts file bankruptcy?
Asked on Nov 20th, 2016 on Bankruptcy - Oregon
More details to this question:
Very small projected income over next year. Considering filing bankruptcy as an option to dissolve corporation. What would you advise?
5 ANSWERS
Consumer Bankruptcy Attorney serving Los Angeles, CA
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Orantes Law Firm
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The filing of a bankruptcy petition by itself does not dissolve a corporation. The filing by a non-profit (or for profit) business entity of a Chapter 7 case does not give the entity a discharge either. So, you should think carefully whether you need to file at all. You should consult an attorney specializing in corporate law to determine whether there are issues that you should consider and what to do regarding resolution.
Answered on Jan 12th, 2017 at 4:30 PM
Commercial & Bankruptcy Law Attorney serving Powell, OH
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Ronald K. Nims
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Corporations (whether taxable or non taxable) don't receive a discharge in bankruptcy. A Chapter 7 uses the bankruptcy process for an orderly liquidation of the corporation's assets to the creditors and a Chapter 11 sets up a plan for continuation of the business. So, a Chapter 7 only makes sense for a corporation which has a valuable asset. A Chapter 11 would be appropriate for a corporation which expects revenue in the future but is unable to met it's current bills. Chapter 11 is relatively expense - a minimum of $20,000 in bankruptcy costs and fees, so it only works for a corporation which has liquid assets to pay the fees.
Answered on Jan 02nd, 2017 at 5:41 PM
A corporation cannot receive a discharge in Chapter 7. Therefore, if the corporation files Chapter 7 it will not be relieved of its debts. A Chapter 7 Trustee will liquidate whatever assets the company has, and that is it. A corporation cannot file Chapter 13, and a Chapter 11 would not make any sense if you intend to dissolve the corporation. I suggest you just dissolve the corporation with the Secretary of State. If you have personally guaranteed any or all of the corporate debt, then a personal bankruptcy might be a viable option for you.
Answered on Dec 29th, 2016 at 5:54 AM
Why? No corporation or other business entity is eligible to obtain a discharge of debts. If the principals in the corporation co-signed any of the corporate debts, they, not the corporation, are most vulnerable to having assets taken by creditors with a court judgment.
Answered on Dec 29th, 2016 at 5:54 AM