When Would A Business Consider Filing A Chapter 7 Bankruptcy In New Jersey?
The circumstances that may cause a business to consider filing a Chapter 7 as a debt relief option are widely varied. However, there are some general universal presenting issues. One common scenario is a liquidity crisis experienced by a company with diminished cash flow to meet the employer’s routine ongoing monthly operating expenses. There often are more drastic circumstances when a landlord who is owed delinquent rent chooses to file a summary dispossession action to evict a tenant threatening the ongoing business operations. Another triggering event could be multiple lawsuits that are filed by creditors of the business as well as monetary judgments that result in potential levies upon business assets. Finally, a business might consider the need to take some type of action and choose to file Chapter 7 after a simple default on a secured loan and with an objective to achieve a renegotiation or more favorable terms in a bankruptcy case.
Can Any Type Of Business File A Chapter 7 Bankruptcy In New Jersey?
Nearly every of businesses is eligible to file Chapter 7. There are some exclusions for entities that are banks and domestic insurance companies and firms that sell and service stock and securities. Corporations, general partnerships, limited partnerships, limited liability partnerships, and limited liability companies are all eligible to file. Sole proprietorships are also eligible. In those instances, an individual will be the Debtor because they have not created a separate business entity.
Can A Company That Files A Chapter 7 Bankruptcy In New Jersey Start A New Business?
A company that files a Chapter 7 surrenders both the ability to operate and the control of its assets to a Chapter 7 trustee. A company that has filed Chapter 7 ceases to exist. The stockholders of the company are replaced by a Chapter 7 trustee. Nevertheless, the individual equity owners can elect to create a new business with funding and assets unrelated to the Chapter 7 Debtor. The Debtor entities assets are under the jurisdiction and control of the bankruptcy court and the Chapter 7 trustee.
What Qualifications Does A Business Need To Meet In Order To File A Chapter 7 Bankruptcy In New Jersey?
A business entity does not have to complete the administrative requirement of credit counseling. Nevertheless, A business must be a separate legal entity validly created under the laws of the state where the case is filed. An entity can also file a Bankruptcy case where their principal place of business or domicile is located or where the principal assets of the company are located. A corporation that has ceased to pay annual fees may have its corporate charter revoked would not be eligible to file bankruptcy unless reinstatement of the entity is achieved.
Although not a qualification, the primary reason a business would file a Chapter 7 would be based on the existence of substantial debts and the related circumstances that caused the insolvency. Usually, it’s a combination of adverse financial events that confront the business simultaneously.
What Debts Can Be Discharged In A Chapter 7 Business Bankruptcy?
In a Chapter 7 Business Bankruptcy, the entity itself does not receive a discharge of debt. For that reason, there is no formal extinguishment of debt as the final conclusion as occurs in a Chapter 7 individual case. After a case is administered by a Trustee and distributions made to creditors any remaining outstanding business debt owed to creditors when a case is closed remains attached to the corporate entity. The legislative history supports a policy to prevent possible sale of corporate shells of bankrupt entities.
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