Filing personal bankruptcy - "shutting down" company - creating new company?

[phoenyx]

I own a company that is severely in debt, and I signed a personal
guarantee on most of its debt. I do not have a reasonable expectation
to be able to pay all of the debt back. My attorney is recommending
to me that I file personal Chapter 7 bankruptcy, and that I don't bother filing
bankruptcy for the corporation since corporate bankruptcy doesn't
discharge debt. He said that people may sue the corporation, but
since there isn't any assets to grab, any judgements would sort of be
a moot point.

(QUESTION) Is it common just to shut the doors like that, not filing
for Chapter 7? Are there disadvantages to doing this?

He's also stating that the day after the personal bankruptcy is
approved that I can form a new company.

(QUESTION) What kind of things should I make sure to avoid to not get
into any type of successor corporation liability?

[keepmine]

A business would file a Chapter 11 and then convert to a 7. Usually, this is an expensive proposition.
If you bk all of the PG's in a 7, you'll acomplish the same thing. Just shut the doors and contact your Sec. of State to withdraw your charter or cancel the corp. filing or howeevr it's handled in your state. Speak with your lawyer about this prior to starting a new business.

[SinkingFast]

Someone else who used to post here was in a similar situation. Their attny suggested letting the Company die a natural death. Then file personal BK. As bad as the changes have been for personal BK's, business BK is far worse, is what his attny said.

That may be your best course of action. Let the business die a natural death, close up shop, and then file personal BK.

[SinkingFast]

On the issue of starting a new business the day after you file,...........

That may be tricky at best.

The day you file set the BK estate for purposes of your personal BK. Everything you own and everyone you owe on that day is part of the BK estate. And the Trustee has control over your BK estate.

If you run right out, the day after filing, and start a new business, the Trustee could go after the new Company as well. Anything that happens during the 90-120 day or so period between filing and discharge is up for grabs. You're not really home free until you're case is closed. And even then, the Trustee can reopen your case at a later date if they can prove they have sufficient concerns and evidence.

You might wanna wait a while before you go starting a new company, if you do decide to file personal BK. It's best to lay low and not do anything during an active BK that will draw attention to you or your case.

Post personal Ch 7 BK, I'd imagine you're gonna have trouble getting personal guarntee loans for the Company. Maybe even insurance as well. You need to research this thoroughly before you decide what to do. What's your best course of action.

[phoenyx]

I do have a bankruptcy lawyer, and I'm going to be seeking a few other opinions from other lawyers, but, I'm interested in other people's thoughts.

I've thought a lot about what my lawyer is recommending, and I think I get what he's recommending now.


He's actually recommending that after the bankruptcy is finalized, that I file a sole proprietership as the new company - so the new company name is simply an alias for me.

I guess his reasoning is that since I will have already bankrupted all of the current corporation's liabilities, on a personal basis since there's personal guarantees, that there can't be successor corporation liability because: (a) successor is a sole proprietership not a corporation; and (b) the new entity - just me - has already received a discharge from all the debts.

None of the physical assets are transfering to the future, but all my knowledge is.



Anyone worried about my lawyer's advise? I am a bit worried, I'll admit .... But all I can figure out how to make a living after is doing the same thing that I've been doing - just starting over and not making all the same mistakes.

[Bobby'sGirl]

Go for it!

Business, as well as life, needs us to take risks and even if we get bumped and dumped on occasion, each experience should help us learn more about ourselves and the business environment. Don't let what happened with your first business lessen your expectations for yourself or belief in your capabilities. Am I happy that I am declaring BK partly because of debts incurred in a business --- no. But do I sit here defeated by the experience? Again, no. Learned what direction I need to go next.

Re: liabilities from the old corp: new company, new tax identification number from the IRS, only continuity is owner. Trust your lawyer on this one.

Good luck!