Many individual debtors file for Chapter 7 bankruptcy because they will obtain some financial breathing room through the discharge of their unsecured debts. For example, credit card debt can spiral upward over time, and it can reach the point where you simply can’t pay all of your credit card bills and the other debts that you have. If you successfully file for a Chapter 7 bankruptcy, the credit card debts could be discharged, and you will find it easier to keep your other obligations current. Credit card debts are just one type of unsecured debt that can be discharged through a Chapter 7 bankruptcy filing. Others would include medical bills, unpaid lease obligations, past due utility bills, personal loans, and payday loans.
A Chapter 7 bankruptcy can also be filed by a limited liability company. However, things work a little bit differently when it comes to the details. A Chapter 7 bankruptcy is a liquidation bankruptcy, so nonexempt property must be turned over to a bankruptcy trustee. It is liquidated, and the proceeds are used to pay the debts. When an individual files for this type of bankruptcy, many forms of property are exempt, including up to $40,000 of home equity (in the state of Oregon, or $50,000 for a married couple), $3000 of equity in a motor vehicle.
There are no such exemptions when you file a business bankruptcy, and there is no discharges. The purpose of a business Chapter 7 filing is to permanently shut the doors and liquidate the assets to pay as much of the outstanding debt as possible. The bankruptcy trustee handles the liquidation tasks, so the business owner does not have to interact directly with the creditors. You have to understand the fact that an individual owner of an LLC will still be liable for any business debt that was personally guaranteed if the proceeds from the liquidation were insufficient to pay these debts in full. Under these circumstances, you will want to consider a Chapter 7 as an individual.
If you would like to discuss a business or personal bankruptcy with a licensed attorney, we would be happy to accommodate you. Our firm offers free, no obligation consultations, and you can request an appointment if you send us a quick message through this page: Portland, OR bankruptcy attorney.