A committee chairman has revealed that your supervisor wants you personally to prepare a report discussing the following options for a client who is in serious business trouble. Your firm's client just recently revealed that his company was $2.9 million in debt and that his company is not incorporated. He has reluctantly asked if your firm could advise him on the process of bankruptcy.
- Define bankruptcy.
- Explain if the client can file Chapter 7 bankruptcy.
- Explain if the client can file Chapter 11 bankruptcy.
- Explain if the client can file Chapter 13 bankruptcy.
- Discuss the benefits and drawbacks of the client filing bankruptcy.
- Discuss how the type of bankruptcy would differ if the client's company was owned by a partnership.
- Give advice whether or not the client should file bankruptcy. If so, what type of bankruptcy should the client file?
Hello. I provide the following to assist you.
Bankruptcy is a relief that individuals, corporations, partnerships, or married couples seek to relieve them from paying debts that they are unable to pay.
I provide the following as an in depth explanation of each Chapter of bankruptcy:
"Chapter 7 bankruptcy: Chapter 7 is the most common type of bankruptcy proceeding. Chapter 7 is available to individuals, married couples, corporations and partnerships. In this proceeding, individual debtors may seek a discharge of their unsecured debts, meaning that they are extinguished by order of the bankruptcy court at the end of the proceeding. Unless there are problems in the case, individual debtors are usually able to get a discharge within four to six months of filing the case. As in all bankruptcy filings, the filing of a Chapter 7 proceeding imposes an automatic stay on all creditors, which prevents them from trying to collect their debts without first getting approval of the bankruptcy court. A bankruptcy trustee is appointed to the debtor's case, who controls all of the debtor's assets. All creditors must be given notice of the proceeding. The trustee then identifies which assets of the debtor are exempt from the bankruptcy proceeding (such as personal effects, household goods, qualified retirement funds), and those that will be sold to pay off creditor claims.
A Chapter 7 is a liquidation proceeding, which means that the debtor's non-exempt assets, if any, are sold or otherwise liquidated by the trustee. The proceeds are distributed to creditors according to the priorities rules established by the federal bankruptcy code. Any wages the debtor earns after the case is begun are the debtor's, beyond the reach of creditors who had claims on the date of filing.
Chapter 11 bankruptcy: Chapter 11 is a reorganization proceeding, typically for corporations or partnerships. A business in financial trouble may elect to file a Chapter 11 petition to try to reorganize outstanding debts and continue ...
This solution provides a detailed explanation of bankruptcy in approximately 1200 words.