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West Palm Beach Bankruptcy & Business Attorneys > > Bankruptcy Attorneys > Do Businesses Receive a Discharge in a Chapter 7 Bankruptcy Case?

Do Businesses Receive a Discharge in a Chapter 7 Bankruptcy Case?


When you own a business and are struggling to keep the business afloat, you might be considering a corporate or business bankruptcy. Yet understanding the specifics of a business bankruptcy case can be very complicated for a business owner that does not have experience with this area of the law or has not been involved in a business that has filed for bankruptcy in the past. One question business owners often want to know when they are planning to file for Chapter 7 bankruptcy is whether their case will go through the same steps as a consumer bankruptcy and whether the business will receive a discharge at the end of the case.

Since both businesses and individuals can file for Chapter 7 bankruptcy, business owners often assume that their company will receive a discharge. However, unlike in personal bankruptcy cases (where the discharge of debt at the end of a Chapter 7 case is the key benefit for individual filers), businesses do not receive a discharge. Our West Palm Beach bankruptcy attorneys can clarify how this works.

Most Types of Businesses Do Not Receive Discharges 

Generally speaking, when an individual files for Chapter 7 bankruptcy, the goal is to have all eligible debts discharged at the end of the bankruptcy case so that they can get a fresh start financially. However, this is not how the Chapter 7 bankruptcy process works for businesses. While assets are still liquidated for businesses (as non-exempt assets are in a personal Chapter 7 bankruptcy case), debts are not discharged at the end and the business entity does not get a fresh start. Instead, by filing for Chapter 7 bankruptcy, the business has to plan to close and dissolve, to return any collateral to creditors, and to “wind down” or “wind up” activities according to Florida law.

Sole Proprietors Can Have Business Debts Discharged 

One important exception here is for businesses that are structured as sole proprietorships. Business owners and sole proprietorships are not distinct entities in a bankruptcy case, so a sole proprietorship Chapter 7 bankruptcy is, in effect, a personal bankruptcy. In these situations, business debts can be discharged with personal debts at the end of the case.

What Happens to Remaining Business Debts 

Since there is no longer a business entity in existence, creditors do not have obvious recourse for recovering debts that a business still owes at the end of a Chapter 7 bankruptcy case. However, it is important to talk with an attorney to ensure that there are no issues of personal liability that could allow creditors to seek to recover business debts from individual members, for example.

Contact Our West Palm Beach Bankruptcy Attorneys 

Business bankruptcies work differently than personal bankruptcies, and it is important to work with the West Palm Beach bankruptcy lawyers at Kelley, Kaplan & Eller who have experience handling corporate bankruptcies in South Florida. While there are certainly similarities between business and individual bankruptcies, there are many nuances in corporate bankruptcy cases, and complicating factors, that can be extremely complex to handle without assistance from an attorney. If your business is considering bankruptcy, you should get in touch with a lawyer at our firm today.




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