Chapter 7 Business Bankruptcy
Filing a Chapter 7 business bankruptcy means the company has gotten into straight bankruptcy and no longer desires to continue its investments. The procedure entails that the company liquidates its assets to pay back administrative and legal expenses. Creditors are notified of the bankruptcy so that they can claim how much the debtors owe as well as receive their collateral.
Once a business files for a Chapter 7, creditors cannot continue to collect or take action against the debtor under the Chapter 7 legal protection. The court hires a case trustee who decides which assets can be distributed to pay off the debts and also holds a meeting with all the creditors to ask any questions to the debtor, and the results of this meeting are reported back to the court. Then, the creditors are ranked depending on the highest priority such as taxes and employees’ benefits.
The case trustee handles selling the debtor’s assets and paying back the creditors. After the bankruptcy process is over, the business no longer can exist. Filing a Chapter 7 essentially amounts to closing down of the business.