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South Carolina businesses and Chapter 7 bankruptcy

South Carolina business owners may run into a period of financial difficulty that results in filing for Chapter 7 bankruptcy. While all business owners have the right to debt relief through bankruptcy, the business itself may or may not be allowed to continue operating. If the company is a sole proprietorship, it will continue to operate, as the company and its owner are one entity.

However, if the company is a partnership, LLC or corporation, it is considered to be a separate entity from its owner. Therefore, the company will file for Chapter 7, and the business will be shut down after the petition is filed. As Chapter 7 bankruptcy is a liquidation of assets, a trustee will be appointed to determine which assets should be sold to pay off creditors. In addition, the trustee may decide which creditors are to be paid off.

In some cases, the trustee can allow a sole proprietor to keep certain tools related to their business. These will be exempt from liquidation up to a predetermined dollar amount. If a company wishes to reorganize through bankruptcy, it can file for Chapter 11 bankruptcy instead. This allows it to reorganize its debts without having to cease operation.

Prior to going through the asset liquidation process, it might be worthwhile to talk to a bankruptcy attorney. An attorney might be able to provide information about the benefits of bankruptcy, such as a stay from creditor action and a fresh financial start. Doing so may also be helpful for business owners who need to know what happens to their company if they file for a personal bankruptcy. Depending on the circumstances in the case, it could be possible to continue running the company after it has been settled.

Source: Houston Chronicle, "Can I Keep My Business If I File for Chapter 7 Bankruptcy?," August Jackson, Accessed Feb. 12, 2015

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