Business Bankruptcy

Chapter 7: Business

When a business can no longer meet its obligations, Chapter 7 provides an orderly, court-protected way to wind it down. A court-appointed trustee takes control of the business assets, sells them, and distributes the proceeds to creditors. The entity is then closed. For an owner facing mounting debt and pressure, it's a clear, legal end point rather than a slow collapse.

This page covers how a business Chapter 7 works, how it differs from a personal filing, and how we approach it. Every business is different, so the best first step is a conversation about yours.

How a business Chapter 7 works

Filing triggers an automatic stay, which stops creditor collection against the business right away. A trustee is appointed to gather and liquidate the company's non-exempt assets and pay creditors in the order the law requires. Unlike a personal case, there is no repayment plan and no fresh-start discharge for the company itself. The purpose is an orderly liquidation and closure, handled under court supervision rather than left to creditors and collectors.

Whether you operate as a sole proprietor, an LLC, or a corporation changes how this plays out, and so does the question of personal liability. We'll walk through your specific structure and what it means for you before anything is filed.

How business Chapter 7 differs from a personal filing

The two share a name but work differently in ways that matter:

No discharge for the company. A corporation or LLC does not receive a discharge in Chapter 7. The business is liquidated and closed; its debts are not "wiped" the way an individual's are. Only an individual debtor, including a sole proprietor filing personally, can receive a discharge.
No means test for the business. The means test that applies to individual consumer filings does not apply to a business entity. (If you file personally as a sole proprietor, your own eligibility is still evaluated, and business debt can actually change how the means test applies to you.)
Personal guarantees still matter. If you personally guaranteed business debt, closing the business does not erase your personal obligation. That liability often has to be addressed through your own filing, separately from the company's. This is one of the most important things to get right, and one of the most commonly misunderstood.
Sole proprietors are a special case. A sole proprietorship isn't legally separate from its owner, so business and personal debts are handled together in one personal filing, not a separate business case.

Sorting out which debts are the company's, which are personally yours, and how to handle each is exactly the kind of thing to map out before filing. Jerome does that with you.

Experience on both sides of the docket

Jerome has worked both sides of the bankruptcy process, including representing creditors. That perspective is rare, and it means he understands how the other side thinks, what trustees look for, where creditors push, and how these cases actually unfold. When he represents your business, he puts that knowledge to work protecting your interests at every step.

Jerome A. Brown is Board Certified Attorney in Consumer and Business Bankruptcy by the Texas Board of Legal Specialization.

Facing a business in trouble?

The right path depends on your structure, your debts, and your goals. We'll review your specific situation and lay out your options before anything moves forward.

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Serving clients across Texas. Offices in Austin metro and Victoria.