Bankruptcy

Why File a Chapter 7 for a Corporation?

By Joseph McDaniel, Esq.

He wanted me to file a bankruptcy petition for his flat puppy corporation.

I pointed out that such a filing would not discharge the debts of the corporation.

He knew that.

I told him I'd have to charge him to file the Chapter 7 for the corporation, and to attend the First Meeting of Creditors with him, and to attend the probable Rule 2004 exam with him if the trustee wanted to know more about the flat puppy.

He knew that.

I pointed out that he'd have to list ALL the debt and ALL the assets, and explain where the assets went if they're not there, and if he sold them he'd have to account.

He knew that.

I pointed out that such a filing would not discharge HIS personal guarantees.

He knew that.

I pointed out that the corporation does not survive the process; the legislative history says that after the corporate estate has been fully administered, the corporation simply ceases to exist. The legislative history says that's to prevent trafficking in corporate shells. Whatever that is.

He didn't know that but wasn't surprised and didn't care.

I pointed out that the corporate Chapter 7 filing would not give him as President the benefit of the automatic stay.

He knew that.

I pointed out that he'd have to give the Chapter 7 trustee the unsold pile of worthless widgets in his garage.

He knew that, and said his wife would kiss him the day she could park again in the garage.

So WHY, I asked, do you want to file this corporate Chapter 7?

To make my phone stop ringing, he said.

Well, okay then, I said.

I also pointed out that it won't make the phone stop ringing entirely, because you may have personally guaranteed some debt.

Yep, he said, but three calls a month beats three hundred calls a month.

I had to agree.

NOTHING HERE CONSTITUTES LEGAL ADVICE RE A CHAPTER 7, CHAPTER 13, CHAPTER 11, OR CHAPTER 12. FIND AN ARIZONA BANKRUPTCY LAWYER WHO IS BOARD CERTIFIED IN BANKRUPTCY LAW, AV RATED, AVVO 10 RATED, ON SUPERLAWYERS, OR JUST VERY EXPERIENCED AND A FORMER CHAIR OF SOME BANKRUPTCY SECTION OR COMMITTEE. NOTHING HERE MAY BE USED AS LEGAL ADVICE IN CONNECTION WITH ANY BANKRUPTCY, WHETHER THAT BANKRUPTCY IS IN PHOENIX, GLENDALE, TEMPE, MESA, SCOTTSDALE, OR ANYWHERE ELSE.

Full post as published by Arizona Bankruptcy Attorney Blog on June 03, 2009 (boomark / email).