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  1. #1
    Join Date
    Aug 2017
    Posts
    1

    Default Should You File a Bankruptcy Case for an Insolvent LLC

    My question involves bankruptcy in the state of: Texas

    I was the sole owner of a small business (LLC) and I stopped doing business several months ago. I am now working as an employee at a medium-sized corporation.

    My business bank account, which was my LLC's only asset, has been depleted. However, the LLC has numerous liabilities that I have been unable to repay. These creditors have turned everything over to collection agencies, who are now calling me constantly. In addition, I was just served with a lawsuit (naming my LLC as the defendant) from one of the creditors. I don't dispute the validity of these debts, I just can't do anything about it right now. I really don't know what else to do. Should I file a company bankruptcy for my LLC?

  2. #2
    Join Date
    Sep 2010
    Posts
    478

    Default Re: LLC Discharge

    You could have the LLC file a Chapter 7 but such would be a complete waste of time and money (the LLC must use an attorney to file bk). Filing a corporate (LLC) Chapter 7 will not result in a Discharge. Only people get discharges in Chapter 7.

    The entity is "dead". If a creditor sues the dead LLC and gets a default judgment, who cares? The judgment isn't worth the paper it is printed on - how is the creditor going to collect against a dead entity?

    Maybe you should send letters to all LLC creditors telling each that the entity is no longer operating and has no assets. Some creditors will close the file others won't. For those who won't and stupidly file a lawsuit against a "dead person", they will simply be pounding sand in trying to collect.

    Edt to add: If any of the entity debt has been personally guaranteed by you, make sure you pay that debt since, if you don't the creditor will sue you under the guaranty.

    Des.

  3. #3
    Join Date
    Oct 2014
    Posts
    8,238

    Default Re: LLC Discharge

    Quote Quoting despritfreya
    View Post
    The entity is "dead".
    It is certainly broke, but not technically dead (maybe on life support?). But if you never are going to do business with that LLC again (and there likely is no reason to do that) you may want to take the formal steps under your state LLC statutes to dissolve the LLC.

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