Chapter 7 Corporate Bankruptcy

Bankruptcy Procedure

While a corporation can voluntarily file for Chapter 7 bankruptcy, its creditors can also force the business to involuntarily enter Chapter 7. Unlike Chapter 7 bankruptcy for individuals, however, a corporate Chapter 7 petitioner does not receive a discharge of its debts. Technically, these debts survive dissolution of the business. Once a petition is filed, the trustee manages dissolution of the business, selling the business's assets and distributing funds to the creditors in accordance with priority of their claims. During the pendency of the case "the automatic stay" prohibits the debtor's creditors from pursuing debt collection.