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The Chapter 7 Process
Along with appointing a trustee, the court creates a “bankruptcy estate.” This gives the court and trustee the power to examine and handle the company’s financial affairs. In some cases, the bankruptcy court may authorize the trustee to operate the business for a limited period of time, if it is necessary for the estate. A Chapter 7 trustee is responsible for selling all the assets and distributing the proceeds to the creditors after administrative and legal expenses are paid.
Chapter 7 and What Happens to Employees
A Chapter 7 bankruptcy filing usually means the business will cease to exist and must close their doors at the time of filing. Any money made by the business after the case is filed had to be turned over to the trustee. If employees need to be terminated, they will receive some type of wages during the bankruptcy process. The Bankruptcy Code has a list of payment priorities that the trustee must follow. Near the top of that priority list are claims for wages, salaries, and commissions.
Creditor Claims in Chapter 7 Bankruptcies
Generally all creditor’s claims will either be secured or unsecured claims. A secured claim is a claim made by a creditor that is secured by a lien on some property of the business. An unsecured creditors claim is one that is not secured by a lien. Secured creditors will have their collateral returned to them.
If the company doesn’t have enough money to repay them in full, they will be grouped with other unsecured creditors for the rest of their claim. Every creditor will be notified of the Chapter 7 bankruptcy. They should file a claim in case there’s money left for them to receive a payment. Unsecured creditors are usually the last to be paid under the priority list set forth in the Bankruptcy Code.
Need to File Bankruptcy for Your Business
Should you decide to obtain bankruptcy information with regards to your business, please call us at 407-BANKRUPT. The Bankruptcy Code is written in a way to promote business and get back out there and start a new business. We will help you with your old business and restart your life with a clean slate. We look forward to hearing from you. Please call us at 407-777-7777 today.
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