When a Texan consider the idea of filing for Chapter 7, they are often under the impression that it is simply for people who are struggling with debt and would like to clear them in their personal circumstances. However, a Chapter 7 bankruptcy can also be used by a business. Chapter 7 for businesses might not be as prominent in comparison to other options, but for those who meet the criteria, it is a viable choice to move forward in their business and personal lives.
Recently, an energy company in Texas filed for Chapter 7. The company began operations in 2009 and explored and produced oil and gas. According to the filing, the company has between $10 million and $50 million in assets. Its liabilities fall into that same area. There will not be any funds remaining to pay their unsecured creditors once the administrative expenses have been calculated. With filing for Chapter 7, the company's assets will be sold so the lenders can be paid. This is different from a Chapter 11 in which it is possible to negotiate a restructuring and retain the assets.
Financial problems in a business or in one's personal endeavors can lead to a great deal of worry, trepidation and fear. There can be calls from creditors, concern about the future, and behavior on the part of those to whom money is owed that crosses the line from pursuit into harassment. Chapter 7 is an alternative that should be taken into consideration to get on better financial footing to help move forward. Chapter 7 is frequently not considered for a business, but there are situations when it is the preferable option.
In this case, an energy company has decided to file for Chapter 7 as its assets and debts fall into the same range and there are items that can be sold to pay back lenders. Those who are facing similar issues in their business should speak to an attorney to decide whether Chapter 7 or some other choice is the way to go.
Source: bizjournals.com, "Houston E&P company files for Chapter 7 bankruptcy," Joshua Mann, Oct. 26, 2016