Every Texas business has a limited number of options for eliminating their debts. Filing for bankruptcy is one solution, but it may lead to the liquidation of a business’s assets and its final dissolution. There are different advantages and disadvantages for a Limited Liability Company (LLC) to consider when filing for bankruptcy.
The LLC’s assets are sold
After a an LLC files for bankruptcy, it ceases its operations automatically. The trustee liquidates his or her assets and hands them over to creditors.
The LLC creditors are paid
Each creditor receives a fair distribution of the LLC’s assets. Creditors are no longer allowed to make collection efforts or file lawsuits against the business.
The LLC’s debts are eliminated
The owners of the LLC no longer have any assets or liabilities. The business no longer exists, so there are no debts for the owners to worry about. However, you are liable for any personal debts that are connected to your business. So not every business owner is guaranteed to receive personal debt relief.
The LLC is no longer in business
After a Chapter 7 bankruptcy goes into effect, the LLC no longer operates as a business, but it still exists. Making your LLC business nonexistent requires that you formally dissolve it.
Choosing the best option for your LLC
There are certain facts you should be aware of about filing Chapter 7 bankruptcy for an LLC. You may be held personally liable for the business’s debts even after the assets are liquidated. If you wish to continue operating the business, you have the option to file for Chapter 13 bankruptcy. Make sure that you understand what your Chapter 7 options are first.