I need to dissolved my S Corp but have outstanding debt
Full Question:
Answer:
An officer of a corporation is generally not personally liable for the debts of the corporation, as long as the officer acted within the scope of his/her authority. In some cases, a corporation may elect to declare bankruptcy, as opposed to dissolving, in order to avail itself of certain protections afforded debtors under the Bankruptcy Code, such as the automatic stay against lawsuits or collection actions that might otherwise be commenced against the company, or bankruptcy court procedures that permit the efficient handling of a large volume of claims.
Also, if it is considered possible for the dorporation to operate profitably in the future if existing debts were able to be discharged (such as in the case of certain debts that were the result of unusual or "one-time" events), reorganization through a Chapter 11 bankruptcy should be considered.
While the significant costs of a bankruptcy proceeding may disfavor declaring bankruptcy rather than undergoing a voluntary dissolution, bankruptcy may offer advantages to larger companies having significant assets, a high number of outstanding claims and/ or multiple threats of creditor lawsuits.
In a Chapter 7 or 13 bankruptcy proceeding, a company's assets are totally liquidated, and the assets are divided by a bankruptcy court among the individual's creditors. In the case of a corporation, the corporation is rendered defunct upon liquidation and distribution. There is no need to forgive remaining debts of a corporation since the corporation is no longer a legal entity for creditors to pursue.
Filing a bankruptcy petition automatically suspends all existing legal actions and is often used to forestall foreclosure or imposition of judgment. After 45 or more days a creditor with a debt secured by real or personal property can petition the court to have the "automatic stay" of legal rights removed and a foreclosure to proceed.
I suggest contacting a local attorney to review all of the facts and documents involved.