When a business files for bankruptcy, the owner of the business has the option to liquidate assets in order to settle all of the debts. This instance refers to chapter 7 bankruptcy. Chapter 7 of Title 11 of the United States Bankruptcy Code manages the entire process of liquidation in order to settle debts and other transactions associated with the business that has been subject to bankruptcy.
A party who owns a bankrupt business has several options as to what kind of bankruptcy code he or she will choose to file. Chapters 11 and 13 of the same bankruptcy code involve reorganization of a debtor rather than liquidation as provided for by Chapter 7. When a business, either a partnership or corporation, files for Chapter 7, it dissolves as a legal entity. When an individual files for the same form of bankruptcy, he or she receives a Chapter 7 discharge.
Businesses that have been subject to Chapter 7 bankruptcy may have its assets sold to address creditors and other debts it may have incurred. It is possible for whole divisions of a corporation to be sold in an effort to address debts. An individual is also subject to the sale of his or her assets in order to address his or her debts. However, the individual filing for Chapter 7 bankruptcy has the ability to exempt some assets from being sold. The individual suffering this form of bankruptcy will have this reflected on his or her credit report for a minimum of 10 years as compared to the 7 years if a Chapter 13 bankruptcy was filed.