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  1. #1
    Join Date
    Aug 2014
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    Default Bankruptcy Dissolution While in Litigation

    My question involves business law in the state of: Illinois

    Plaintiff – Illinois
    My Company - Pennsylvania

    My company (S –corp) is involved in a lawsuit and the legal costs have basically bankrupted the company. I prefer to Chapter 7 but I can't move or sell my trademark in that situation. Company has a trademark that has value to me worth about 700K sales per year. If I file for Chapter 7 I risk the trustee putting it up for sale otherwise I would do it yesterday and start all over the next day. I can no longer afford the legal expenses and realize the plaintiff will be rewarded some judgment. I have tried to settle numerous times but they want the entire amount they are suing for, 66K, which I do not have. They wouldn't even take a payout plan unless I personally signed for it which I will not do.

    My question is what are the ramifications if I dissolve my company during litigation?

  2. #2
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    Oct 2006
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    16,474

    Default Re: Dissolution While in Litigation

    Quote Quoting MichaelR
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    My question involves business law in the state of: Illinois

    Plaintiff – Illinois
    My Company - Pennsylvania

    My company (S –corp) is involved in a lawsuit and the legal costs have basically bankrupted the company. I prefer to Chapter 7 but I can't move or sell my trademark in that situation. Company has a trademark that has value to me worth about 700K sales per year. If I file for Chapter 7 I risk the trustee putting it up for sale otherwise I would do it yesterday and start all over the next day. I can no longer afford the legal expenses and realize the plaintiff will be rewarded some judgment. I have tried to settle numerous times but they want the entire amount they are suing for, 66K, which I do not have. They wouldn't even take a payout plan unless I personally signed for it which I will not do.

    My question is what are the ramifications if I dissolve my company during litigation?
    Every asset of your corporation, including its trademark, would be an asset that the bankruptcy trustee can and would sell.

  3. #3
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    Aug 2014
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    Default Re: Dissolution While in Litigation

    Quote Quoting llworking
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    Every asset of your corporation, including its trademark, would be an asset that the bankruptcy trustee can and would sell.
    Should I prepare to dissolve the company and do something with the trademark to protect it?

  4. #4
    Join Date
    Sep 2010
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    478

    Default Re: Dissolution While in Litigation

    You say the trademark is worth $700k in sales/yr to you. What is it worth to someone else?

    If you put the entity into a Chapter 7 you can buy back all of the entity assets (including its good will). Yes, any sale will be subject to higher and better offers but, is there anyone out there that would be willing to out-bid you in order to obtain those assets? If you are the successful bidder you would be purchasing the assets “free and clear” of any claims of the entity’s creditors. You need to sit down with a bk attny who handles corporate chapter 7s to discuss this further.

    As to dissolving the company, you most likely would have to sell all assets and use the proceeds to pay entity debt. You would need to check state law on how to do that as well as discuss dissolution with a qualified attny. Remember, if you simply try to move assets to a new entity, the creditors of the old one will go after the new entity based on successor liability/alter ego theories.

    Des.

  5. #5
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    Aug 2014
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    9

    Default Re: Dissolution While in Litigation

    Quote Quoting despritfreya
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    You say the trademark is worth $700k in sales/yr to you. What is it worth to someone else?

    If you put the entity into a Chapter 7 you can buy back all of the entity assets (including its good will). Yes, any sale will be subject to higher and better offers but, is there anyone out there that would be willing to out-bid you in order to obtain those assets? If you are the successful bidder you would be purchasing the assets “free and clear” of any claims of the entity’s creditors. You need to sit down with a bk attny who handles corporate chapter 7s to discuss this further.
    How does the sale actually work? The time frame, advertising, etc?




    Quote Quoting despritfreya
    View Post
    As to dissolving the company, you most likely would have to sell all assets and use the proceeds to pay entity debt. You would need to check state law on how to do that as well as discuss dissolution with a qualified attny. Remember, if you simply try to move assets to a new entity, the creditors of the old one will go after the new entity based on successor liability/alter ego theories.

    Des.
    If I am not a share holder of the new corp wouldn't they have to come to Pa or any other state the new company incorporates in? I am not sure if Illinois would be the venue for civil litigation on a new company that does not have the same share holder (of old company in current suit) incorporated in lets say Nevada. It isn't illegal to WORK for a start up company, in an industry that is all I know, after my business is dissolved, no?

  6. #6
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    Default Re: Dissolution While in Litigation

    Quote Quoting MichaelR
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    How does the sale actually work? The time frame, advertising, etc?
    Business bankruptcies can be complicated, and their resolution fact-dependent. If you are interested in pursuing a business bankruptcy and then attempting to acquire the assets of the business from the bankruptcy court, you should discuss your strategy with a business bankruptcy lawyer. You should anticipate a significant hourly fee.

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