A construction company in North Carolina is filing for bankruptcy. The company had reported over #3 million in revenue for the previous two years and is filing for Chapter 7 bankruptcy, saying that they cannot pay their debts. The company has a liability of $1.2 million, according to its reports. Included in that debt is a loan from BB&T for just over $150,000, secured with a lien on its general assets. The company’s other liabilities include its employees and local loans.
With Chapter 7 petitions, assets are liquidated in order to pay the creditors. When a business files for Chapter 7, the court assigns a trustee to oversee the liquidation of assets and stops the operation of the business. The trustee sells off the company’s assets and distributes the money to the creditors. Will the employees lose their jobs? Not necessarily. The trustee may sell parts of the business to other companies.
When an individual files for bankruptcy, they are given a fresh start – a bankruptcy discharge. However, companies that file for Chapter 7 are dissolved.
Though Chapter 7 is popular for businesses, individuals may also file for Chapter 7. Their assets, except for some exempt property, will be sold to pay their creditors, and most liens are honored. Some debts, such as child support payments and student debt, cannot be discharged by the court. The bankruptcy will remain on the individual’s record for 10 years.
When an individual is considering filing for bankruptcy, their top concern is often what assets they will be allowed to keep and what will be liquidated. The properties exempt vary from state to state, so it’s a good idea to consult with a lawyer to determine which assets, if any, are exempt. A lawyer can also help determine which debts are eligible for discharge. When a company files for bankruptcy, they will consider whether they want to dissolve their company or keep it running.
Source: Triangle Business Journal, “Coastal construction company goes bankrupt,” Chris Bagley, April 25, 2013