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Corporate Bankruptcy Process

What is corporate bankruptcy?

Corporate bankruptcy is a process in which a company legally declares that it can no longer meet its business and financial obligations. When a company files for corporate bankruptcy in a bankruptcy court, it requests for protection from its creditors taking legal action against the company for not being able to repay them. Before filing for bankruptcy individuals and business owners need to understand the various aspects involved in the corporate bankruptcy process. Find below the popular questions about corporate bankruptcy that people ask

What can an Individual do if his/her Corporate Bankruptcy gets Dismissed?

If an individual’s corporate bankruptcy gets dismissed, he/she may file a motion in the bankruptcy court requesting the bankruptcy to be re-opened.

What can an Individual do if he/she is Forced to File Corporate Bankruptcy?

If an individual was forced into bankruptcy and the case was eventually dismissed, then he/she may sue the trustees for defamation and ask the bankruptcy court for sanctions and legal fees.

Can Business Debt be Discharged in a Corporate Bankruptcy?

Business debts may not be discharged in corporate bankruptcy. They may be re-organized. In most cases, there would be a plan in which the creditors may agree to accept only a part of the debt that is owed to them so that the business can continue.

Would an Individual be Liable to a Corporate Bankruptcy filed by an Insurance Company?

In most situations, if an individual does not have any personal guarantees of loans that have been taken by the insurance company, he/she would not be liable for a corporate bankruptcy. If he/she has made any guarantees to the corporate loans, then he/she may liable to it. However, if the corporate bankruptcy negatively affects anybody who has bought insurance from the company, then they may complain to the Department of Finances and that could have a negative effect on the individual’s license.

Can an existing S Corporation start a Second S Corporation before Filing Corporate Bankruptcy to continue Business?

An existing corporation may start a second S corporation before filing corporate bankruptcy in order to continue business. However, the corporation may not transfer any assets from one company to the second. If this is done, the bankruptcy trustee may cancel the transaction and dismiss the bankruptcy appeal.

Can the Interests of a Company filing Corporate Bankruptcy be Acquired by another Individual?

One may acquire an interest in a company that is filing corporate bankruptcy if it is a chapter 7 bankruptcy. However, this interest may not be purchased directly from the company. It may have to be purchased from the bankruptcy trustee. This is because when a corporation files for a chapter 7 bankruptcy, all the interests and assets of the company become a part of the bankruptcy estate.

Can Wages be Discharged in a Corporate Bankruptcy?

Wages may not be discharged in a corporate bankruptcy. Wages, in most cases, may be pursued against the business owners. The wages may be paid back personally in a chapter 7 bankruptcy and for the corporation in a chapter 11 bankruptcy.

Understanding what are the different aspects involved in corporate bankruptcy will help companies who are planning to file for one go through the entire process without any trouble. It will also help companies know what their rights and obligations towards creditors are.
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