Chapter 7 bankruptcy is a debt relief option that is most common among consumers; however, small businesses, too, may choose to file for Chapter 7 bankruptcy protection in order to deal with overwhelming debts.
Recently, it was reported that a De Pere, Wisconsin, private school is considering filing for Chapter 7 bankruptcy after a drop in enrollment and other financial hits. Officials made the decision to close the school on June 26.
Board members of the Wisconsin International School said in a recent letter to parents that the projected enrollment for the 2014-2015 school year dropped significantly from the 2013-2014 school year.
Additionally, the board members said donations declined, which added financial pressure.
After meeting with various legal experts, the board members said it was agreed that “the best option for a fair distribution of the remaining assets to creditors is to move towards filing for bankruptcy.”
The parents were told that they would be given the name and contact information for the court-appointed trustee if Chapter 7 bankruptcy is filed. During bankruptcy, a trustee is put in charge of identifying assets that can be liquidated in order to pay off creditors.
Creditors, in turn, are asked to file claims to the debts they are owed, and the trustee decides which creditors have priority to get paid because there are rarely enough assets to repay all creditors.
The Chapter 7 process for small businesses differs depending on the way the business is structured, i.e. a sole proprietorship, a general partnership, a corporation or an LLC.
An experienced bankruptcy lawyer can help business owners determine the best path to debt relief, whether it is through filing for Chapter 7 bankruptcy or some other option.
Source: WBAY.com, “Wisconsin International School Considers Filing for Bankruptcy” July 7, 2014