Michaele and Tareq Salahi have once again placed one of their businesses into bankruptcy. The couples’ “America’s Polo Cup Inc.” company apparently filed Chapter 7 bankruptcy recently with $320,000 in debt. The company fled to the protection of bankruptcy after it was sued for non-payment of their debts which are mostly owed to a catering company. The Salahis’ decision to place the company into a Chapter 7 bankruptcy and not a Chapter 11 bankruptcy means that the company’s assets will be liquidated and it will close its doors. Chapter 7 bankruptcy for businesses allows a company to stop lawsuits and asset seizures in much the same way that a personal Chapter 7 bankruptcy filing stops creditors from suing or garnishing the wages of individual debtors; but there are some serious differences.
In Chapter 7 bankruptcy for a business, the company is not allowed to continue operating after the Chapter 7 bankruptcy, that’s why Chapter 11 bankruptcy exists so that a company wanting to continue operating to can restructure their debts. When a company files Chapter 7 bankruptcy, it means that they are effectively liquidating that company, and that creditors will be paid from the sale of the company’s assets. If the assets don’t cover the loans of the creditors, then the creditor may in some cases be able to go after the owner of the business, for example, if the business owner guaranteed a loan. Of course, when an individual debtor files bankruptcy, if the sale of the non-exempt assets does not cover the unsecured debts they owe, then those debts will be discharged by the bankruptcy court.