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[dalon]

I work for a company in WA state that is classified as a Professional Corporation. The owner owns both the business and the real estate. He has mismanaged the finances over the last 5 years, and is now facing foreclosure on the property. He has applied to numerous financial institutions, and no one will refinance his real estate loan, which had a balloon payment due in Feb. 2010. He has "filled out paperwork" with the bank that holds the loan to get the foreclosure delayed, but he says that if that doesn't go through he will file bankruptcy at the last minute to stop the foreclosure. Will that work? I know in personal bankruptcy that a home is sometimes spared, but does this apply to a business also? What type of bankruptcy would a professional corporation file in WA state? If we know which type of bankruptcy we could look up information, but it seems that the laws that apply to professional corporations are different in every state, so finding information is more difficult. Everyone at work is concerned that the business will close because of this foreclosure and we'll all be out of a job. The owner won't talk to anyone about this unless cornered, and even then doesn't explain what is happening, so we're all left to worry about the worst-case scenario.

[ailwyn]

I would think that all assets are treated the same in a corporate bankruptcy.

It may be time to get the resume ready.

[torin7]

I would think that all assets are treated the same in a corporate bankruptcy.

It may be time to get the resume ready.

Chapter 7 business bankruptcy would not save the property. Rather the property would likely be sold to pay back the debts. A Chapter 7 personal bankruptcy also would not save the property, because it can only protect a "homestead" property (where the person lives) and not other types of real estate.

A chapter 11 reorganization business bankruptcy might save the property, but that is a repayment plan of sorts which would require the bankruptcy court to agree to any restructuring of the debt. For specifics related to a particular case, your boss would want to contact a Washington licensed attorney.

[chadburne48]

Federal bankruptcy laws govern how companies go out of business or recover from crippling debt. A bankrupt company, the "debtor," might use Chapter 11 of the Bankruptcy Code to "reorganize" its business and try to become profitable again. Management continues to run the day-to-day business operations but all significant business decisions must be approved by a bankruptcy court.
Sometimes companies prepare a reorganization plan that is negotiated and voted on by creditors and stockholders before they actually file for bankruptcy. This shortens and simplifies the process, saving the company money. For example, Resorts International and TWA used this method.
If prepackaged plans involve an offer to sell a security, they may have to be registered with the SEC. You will get a prospectus and a ballot, and it's important to vote if you want to have any impact on the process. Under the Bankruptcy Code, two-thirds of the stockholders who vote must accept the plan before it can be implemented, and dissenters will have to go along with the majority.
How Are Assets Divided in Bankruptcy?
1. Secured Creditors - often a bank, is paid first.
2. Unsecured Creditors - such as banks, suppliers, and bondholders, have the next claim.
3. Stockholders - owners of the company, have the last claim on assets and may not receive anything if the Secured and Unsecured Creditors' claims are not fully repaid
Wanted to learn Free small business bank account comparisons.

Hope this a help!
God bless!