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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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