LLC Bankruptcy -- Options for Limited Liability Companies

LLC Bankruptcy Options

An LLC (Limited Liability Company) has several bankruptcy options:

• Chapter 7: Liquidation. A trustee sells the LLC's assets and distributes proceeds to creditors. The LLC ceases to exist. No discharge is available for business entities.
• Chapter 11: Reorganization. The LLC continues operating while restructuring debts under a plan. Subchapter V is available for small businesses with debts under $7.5 million.
• State dissolution: Dissolve the LLC under state law without bankruptcy. Works when there are few debts or assets.
• Assignment for benefit of creditors (ABC): A state-law alternative to Chapter 7 that may be faster and cheaper.