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Home > For Small Business > Business Debt & Bankruptcy > Chapter 7 Corporate Bankruptcy |
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Chapter 7 Corporate Bankruptcy
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March 15, 2008 |
A Chapter 7 corporate bankruptcy is a federal court-sanctioned and supervised procedure in which a court-appointed trustee takes over the corporation's finances and debts. In this type of bankruptcy, the trustee liquidates, or sells, the corporation's assets and distributes the proceeds to the corporation's creditors. Sole proprietorships and partnerships cannot file for Chapter 7 corporate bankruptcy. Bankruptcy ProcedureWhile 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. |
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