Generally speaking, I do not recommend filing chapter 7 cases for businesses. It is true that filing the chapter 7 case will stay any collection efforts and deliver most headaches of closing down a business to the trustee instead of to management. On the other hand, once the chapter 7 case is filed the trustee is empowered to investigate all transactions between the company, its officers, vendors, lenders, and all other interested parties. Most clients believe they have nothing to hide but once the trustee begins his investigation many clients do regret initiating the Chapter 7 process.
Instead, I recommend to most of my clients that they simply “go dark.” This involves terminating business operations, closing bank accounts, notifying creditors that the business is closed and simply allowing creditors to take judgments, if they so choose. This process, of course, only works if the company does not have significant assets at the time it closes.
Clients may feel uncomfortable initially at the beginning of this process but the discomfort is greatly outweighed by the flexibility and increased options that management enjoys by retaining control over terminating the business.
