Can A Company Without Debt Go Bankrupt?

Can a company without debt go bankrupt?

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Min Austria
Assistant at Ascent Law LLC

It can seem like an oxymoron to say that a company without debt can go bankrupt. After all, if you don't owe anyone money, then you can't default on your debts and fail to pay your creditors—so how could you ever run into financial trouble? It's important to remember that bankruptcy is a legal status, not just a simple matter of non-payment. Banks and other businesses (excluding partnerships) have the option of filing for Chapter 7 bankruptcy, which means liquidating their assets in order to pay off their liabilities. So even a company with no debt can file for bankruptcy if it decides that it's the best way to deal with its situation.

The short answer is yes; a company without debt can go bankrupt. However, it is much more likely that this company will go into receivership rather than bankruptcy. In some cases, the owners are not willing to give up control of the company and they therefore lose their investment in the business. The ongoing operations of the business are taken over by a receiver who oversees the sale of all assets and distribution of proceeds to creditors.

If you have a questions or need a Business Lawyer, please call this law firm for a free consultation.

Ascent Law LLC

8833 S Redwood Road Suite C

West Jordan UT 84088

(801) 676-5506

Utah Lawyer for Divorce Business Bankruptcy Probate Estates
Ascent Law helps you in divorce, bankruptcy, probate, business or criminal cases in Utah, call 801-676-5506 for a free consultation today. We want to help you.
https://www.ascentlawfirm.com/

Location: Spanish Fork, UT 84660, USA

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