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Chapter 7 Bankruptcy
A chapter 7 bankruptcy case does not involve the filing of a plan of repayment as in chapters 11 & 13. Instead, the bankruptcy trustee gathers and sells the debtor’s nonexempt assets and uses the proceeds of such assets to pay holders of claims (creditors). In addition, the Bankruptcy Code will allow the debtor to keep certain “exempt” property; but a trustee will liquidate the debtor’s remaining assets.
However, in Texas owing to the generous exemptions provided in the Texas Property Code, many but not all individuals filing for this form of bankruptcy relief will lose no property at all.
Nevertheless, potential debtors should realize that the filing of a petition under chapter 7 may result in the loss of property and should carefully review this issue with one of our bankruptcy attorneys.
Dischargeable Debts
- franchise Agreements
- SBA Loans
- judgments against you (but associated liens might not be wiped out)
- obligations under leases and contracts
- credit card debt
- medical bills
- personal loans
- promissory notes
Industry experience:
- Hospitality
- Fitness
- Restaurants & Bars
- Senior Care Facilities
- Retail Franchises
- Entertainment
- Travel Agencies
- Health & Beauty
- Dry Cleaners
Chapter 7 Benefits
A fresh start for individuals
One of the primary purposes of bankruptcy is to discharge certain debts to give an honest individual debtor a “fresh start.” The debtor has no liability for discharged debts. In a chapter 7 case, however, a discharge is only available to individual debtors, not to partnerships or corporations. 11 U.S.C. § 727(a)(1). Money earned after filing from a new job is yours to keep.
An orderly shutdown for your business
Corporate debtors do not receive a discharge, but it does impart other often crucial benefits.
If you are closing the doors to your business and your SBA lender or other creditors are chasing you, and settlement is not an option, the automatic stay imposed by your company’s Chapter 7 bankruptcy filing will stop the harassment and require your creditors to submit any claims to the case trustee instead of blowing up your inbox with e-mails threatening lawsuits or demining immediate payment.
For this reason, many franchisees choose to file a corporate Chapter 7 bankruptcy in order to effect a more orderly shutdown of their business and enjoy some peace of mind.
Careful Planning Required
A bankruptcy should not be filed without careful thought and planning. Although an individual chapter 7 case usually results in a discharge of debts, the right to a discharge is not absolute, and some types of debts are not discharged. Moreover, a bankruptcy discharge does not extinguish a lien on property. If you pledged property as collateral for a loan or you are behind on your home mortgage, be sure to discuss this with your bankruptcy attorney. Moreover, ask about certain exceptions to the bankruptcy discharge that could affect your decision to file.
Have a Question?
The Perliski Law Group is dedicated to helping small business owners survive the closure of their business and the resulting financial damage caused the collapse of their business. During your free initial consultation, we will explain how the Bankruptcy process works and outline the debt relief options that may be available to you under Chapters 7, 11 & 13.
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