Yes. Businesses can also file for Chapter 7 bankruptcy relief. A corporation does not receive a discharge but the business can shut down, turn over its records to a bankruptcy trustee and not have to deal with creditors, pending lawsuits, or collection actions. Sort of a court administered wind-down of a corporation. Businesses include s-corporations and LLCs.
A corporation or an LLC files a Chapter 7 business bankruptcy, a different animal than a Chapter 7 personal bankruptcy. Filing a business bankruptcy lets the owners walk away from the problems of their business and turn it over to a bankruptcy trustee for an orderly liquidation. The business stops operating, and the court liquidates its assets (if any left) and pays what it can to business creditors. Exemptions don’t apply in a business bankruptcy, so the trustee can take anything the business owns: The entire company is liquidated. A lot of times there are no assets left to liquidate so the case becomes a no-asset chapter 7 case. You cannot continue to operate once the case is filed and you will not have your business back. You can however start a new company/corporation and you can retain any assets not administered by the bankruptcy trustee.
Business Bankruptcy Doesn’t Erase Personal Liability:
If you are personally liable for corporate or LLC debts, you could still be on the hook even after the business bankruptcy. You will need to discharge your personal liability for the debts by filing for Chapter 7 personal bankruptcy or by negotiating a settlement with the creditor(s). Otherwise, the creditor(s) can still come after you for full repayment of the debt, even after the business is closed and its liability for the debts is discharged in business bankruptcy. This only applies if you signed a personal guarantee or something similar. In general you are not personally liable for corporate debts.
For a detailed review of your situation call (925) 472-8000.