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So when does it make sense to bankrupt a corporation rather than shutting it down, or terminating its existence? Here are a few advantageous situations to bankrupt a corporation under Chapter 7.
- When a debt collectors try to levy on assets that usually could not be used to pay for debts such as trust fund taxes or personally liable.
- Situations where filing bankruptcy can discourage creditor lawsuits against shareholder personally. Creditors have a tendency to personally sue shareholders or “responsible person”, even if they are not legally liable for the debt.
- When the services of a trustee are desirable to preside over the liquidation of assets and the winding up of the business, freeing the corporation's officers to seek employment, etc.
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