Corp Dissolution vs Bankruptcy

[lafon]

If I dissolve my corporation (I am the sole officer)what happens to all of my debts since I have no assets? Must I dissolve the corporation first and then file Chapter 7 to liquidate all debts? How do I keep the creditors at bay? I was advised to dissolve the corporation rather than file bankruptcy.
Thanks for any assistance & guidance. I am terminally ill with cancer and need a prompt response to these issues.

 

[JETX]

Your message is a little confusing.. you mention "Your corporation" and "my debts". You cannot own a corporation and are not 'normally' personally liable for the corporate debts (read below for how you could be liable). THE corporation is a separate stand-alone legal entity fully responsible for its own debts. Normally you are not personally liable for corporate debts.

First, you cannot just disolve a corporation that has assets. The corporation is a separate legal entity and must pay its bills just like you and I. The corporation must sell its assets and pay the creditors from the proceeds of the sale. It must have ZERO assets and ZERO liabilities left over in order to be 'dissolved'.

Otherwise, the corporation will be hounded to death by the creditors AND they may be able to go after you!! I don't mean to scare you on this, but a lot of people that have very small corporations sometimes screw up and start using the corporate funds as their own (to pay the mortgage, grocery, personal utility, etc.). This is a major NO-NO. What this does is allows the creditors to claim that the corporate protection was a 'shell' and that the corporation was an 'alter ego' of you. Doing this is called 'piercing the corporate veil' and could have some dire impact on you personally.

So, assuming that all your records are clean and that you have paid NO personal expenses from the corporation accounts, the corporation needs to pay all the creditors that it can. Then after making an honest effort to clear the accounts, the corporation may have to file for bankruptcy protection if the liabilities exceed the assets. You need to talk with a good banruptcy attorney in your area for advise on the proper steps to take.

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Steve Halket
Judgment Recovery of Houston
[email protected]
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This is my PERSONAL OPINION and is not legal advice! Consult your local attorney for your specific situation and laws!

 

[lafon]

Mr. Halket: Thank you so very much for your enlightment on this subject. No, there are certainly no assets but plenty of liabilities! I closed an official office and brought the business in my home due to my illness. This was a disaster!!!
Also, I purchased this corporation from 2 people who now reside somewhere in Switzerland. Our buy-sell agreement called for them paying certain liabilities and anything over $2200 in surprises. I received the surprise!! In November alone, 4 trips (this is a travel agency) were never paid for under the old owners. Consequently, I had to personally pay out of my pocket over $12,000.
I could not recover anything from the old owners and my insurance & bond did not cover anything because of co-mingling of money on the former staff. I was told that I should not have paid for these trips and filed claims instead! You tell that to angry clients!!!! The only assets left are some office furniture, one computer, etc. worth about $1200. Liabilities are enormous!! I am certainly not worried about any wrong that I have done. My books are excellent.

Thank you again for taking the time out of your busy schedule.

Lafon