The effect a bankruptcy filing will have on a business depends partly on the chapter of bankruptcy being filed. Federal bankruptcy code designates certain chapters of bankruptcy for certain types of businesses. A business organized as a partnership, limited liability company or corporation functions as an entity separate from its owners. Therefore, one of these companies can’t file for personal bankruptcy. A partnership, LLC or corporation can file for Chapter 7 whereby the partnership or corporation ceases to exist. When a business opens a Chapter 11 case by filing a bankruptcy petition, an automatic stay takes effect and the company must disclose its financial situation and a plan for reorganization.
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