A bankruptcy process is complicated and every company intending to seek protection under bankruptcy laws should first consult with an attorney before taking next steps. Here is important LLC bankruptcy information that can help LLCs contemplating filing for bankruptcy:
1.If the LLC has not yet appointed an attorney, then it should seek out one who is an expert at the type of bankruptcy (Chapter 7 or Chapter 11) that the company is seeking protection under. Plus, this attorney should offer an initial free consultation.
2.Chapter 7 bankruptcy cases may take as little as a few months following the filing of petition, while Chapter 11 cases can drag on for years
3.Once a bankruptcy petition is filed, then creditors must cease all attempts of collecting from the filing company. If creditors continue to demand payment after the petition is admitted in the bankruptcy court, then they are violating the law. Company owners must write official letters (on their company letterheads) asking creditors to “cease and desist” from making any attempt to recover their dues.
4.Now here is some important LLC bankruptcy information: If company owners have given their personal guarantee on business loans, then their personal assets will not be exempted. Such personal assets could be sold to pay off creditors.
5.When an LLC company files for Chapter 7 bankruptcy, it means that it will eventually be liquidated. Once a Chapter 7 bankruptcy process is completed, the company ceases to exist. Chapter 11 bankruptcy, on the other hand, helps a business reorganize its affairs and get more time to repay its debts. Chapter 11 is a positive section so long the creditors and the trustee and all other parties involved agree to the reorganization plan filed by the company.
6.Debts that are not listed in the bankruptcy petition are not impacted by the bankruptcy process. The company continues to be liable for these.
7.Debts that have been obtained by giving false information or by misrepresentation also cannot be wiped out by the successful closure of a bankruptcy process.
8.LLCs that operate a viable product line, but have very large debt on their books, may opt for Chapter 11 bankruptcy. LLCs that see no future in their continuance opt for protection under Chapter 7 of bankruptcy laws.
9.LLCs cannot seek protection under Chapter 12 (which is Family Farmer’s bankruptcy) or under Chapter 13 (which is Wage earner’s bankruptcy).
We hope you found this LLC bankruptcy information helpful.
Other Business Bankruptcy Articles:
Business Bankruptcy
Bankruptcy Of An LLC (Limited Liability Company)