A limited liability company (LLC) is different from a corporation. Although it does have some benefits a large corporation has, it has more tax freedom associated with a business partnership. An LLC protects an owner from any lawsuits that a person or company may file and a struggling LLC can file for bankruptcy. 

What is Bankruptcy?

Bankruptcy is an opportunity to legally dissolve unsecured debts or repay them. Bankruptcy is offered to individuals and businesses. 

Can My LLC File for Chapter 7 Bankruptcy?

Yes, an LLC can file chapter 7 bankruptcy. Chapter 7 bankruptcy is a legal proceeding to discharge an individual’s debt. The unsecured debt can be cancelled. The court typically issues an automatic stay regarding any collection activities and appoints a bankruptcy trustee to: 

  • Seize any LLC assets
  • Liquidates any LLC assets
  • Pay creditors from the liquidated assets

Will The Bankruptcy Court Dissolve My LLC?

Yes, if the LLC assets are considered to insufficient to fully repay all debts, the bankruptcy courts may dissolve, or end the company. 

Can I File Chapter 11 Bankruptcy Instead of Chapter 7?

Yes. Chapter 11 is a legal process to assist companies in eliminating or repaying debts while receiving bankruptcy protection. An LLC is eligible to file for chapter 11 if the bankruptcy courts are convinced the company has the ability to repay debts. While an LCC is in chapter 11, its assets aren’t liquidated. So the company will continue to operate as if it wasn’t in bankruptcy. 

Will My LLC Have to Negotiate any Repayment Plans?

Yes. The owners of the LLC must negotiate repayment plans with its seven largest creditors. The plan is then submitted to the bankruptcy courts for final approval. 

Will I Be Responsible for Any Debts My LLC Has Incurred?

It depends on whether the owners have personally guaranteed the debt. If any LLC member personally guarantees the debt, creditors may seize the member’s personal assets to repay. 

Should I Talk to a Bankruptcy Attorney about Filing for Bankruptcy?

Yes. To understand more about your bankruptcy rights and which bankruptcy to choose, contact a bankruptcy lawyer.