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Ask Maverick Your Own Question
Maverick, Attorney
Category: Bankruptcy Law
Satisfied Customers: 6392
Experience:  20 years of professional experience
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Bankruptcy. California. Client has significant personal credit

Customer Question

Bankruptcy. California. Client has significant personal credit card debt and is upside down on his home. He owns a corporation. The corporation owes its creditors a significant amount of money, more than the value of its computers and other misc. equipment. The client personally guaranteed some of the corporate debt. The corporation is starting to bring in new clients, but not enough to save the company or the client's personal finances. Client wants to file ch. 7 and list the personal guarantees. Should he just walk away from the old corporation, start a new one with the new clients and let the creditors of the old corporation take the existing corporation's computers and equipment, if they want them? If not, what might be alternative approaches?
Submitted: 8 years ago.
Category: Bankruptcy Law
Expert:  Maverick replied 8 years ago.

The proper way to handle this would be to file a Chapter 7 on the corporation and then dissolve the corporation by filing articles of dissolution with the secretary of state. At the same time, the individual would also file for chapter 7 so as to discharge his personal obligations. However, under the 2005 BK laws he may not be able to file Chp 7 and may be forced into a Chp 13 repayment plan.


The other option is for the corporation to file a chapter 11 and for the individual to file a chapter 13 and try to save the business. Under this scenario, both will be under a repayment plan as to secured debt and will likely pay pennies on the dollar for unsecured debt.


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