{"id":286898,"date":"2023-11-08T13:40:00","date_gmt":"2023-11-08T18:40:00","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-law\/bankruptcy\/chapter-7\/chapter-7-bankruptcy-for-llcs-everything-you-need-to-know.html"},"modified":"2026-06-08T11:39:21","modified_gmt":"2026-06-08T16:39:21","slug":"chapter-7-bankruptcy-for-llcs-everything-you-need-to-know","status":"publish","type":"page","link":"https:\/\/www.findlaw.com\/bankruptcy\/chapter-7\/chapter-7-bankruptcy-for-llcs-everything-you-need-to-know.html","title":{"rendered":"Can an LLC File Chapter 7 Bankruptcy? Process and Options Explained"},"content":{"rendered":"\n
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Can an LLC File Chapter 7 Bankruptcy? Process and Options Explained<\/h1>\n\n
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\n By Susan Buckner, J.D.<\/a> | Legally reviewed by Catherine Hodder, Esq.<\/a>\n | Last updated\n
\n \n <\/i>\n Legally Reviewed\n <\/summary>\n\n
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This article has been written and reviewed for legal accuracy, clarity, and style by FindLaw\u2019s team of legal writers and attorneys<\/a> and in accordance with our editorial standards<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n\n

\n \n <\/i>\n Fact-Checked\n <\/summary>\n\n
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The last updated date refers to the last time this article was reviewed by FindLaw or one of our contributing authors<\/a>. We make every effort to keep our articles updated. For information regarding a specific legal issue affecting you, please contact an attorney in your area<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n<\/section>\n\n\n

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Key Takeaways<\/h2>\n

A limited liability corporation (LLC) can file <\/span>Chapter<\/span> 7 bankruptcy<\/span>, but it may not be the best option. When a small business LLC files<\/span> Chapter 7, all business assets<\/span> are liquidated by a bankruptcy trustee<\/span> to pay creditors, and the LLC ceases to exist. Unlike in personal bankruptcy<\/span>, the LLC does not receive a discharge of debt because the legal entity no longer exists after liquidation<\/span>.<\/p>\n\n <\/div>\n <\/div>\n<\/div>\n\n\n

LLC owners<\/span> have several options beyond Chapter 7, including simply dissolving the LLC, filing personal bankruptcy<\/span> instead, reorganizing under Chapter 11, or negotiating with creditors outside of bankruptcy. The right choice depends on the LLC’s assets<\/span>, your personal liability<\/span>, and your business goals.<\/p>\n

If your limited liability company<\/span> (LLC)<\/a> is facing financial challenges, understanding your bankruptcy options<\/span> is critical. Read on for more information regarding Chapter 7 bankruptcy<\/span> for an LLC and your alternatives. If you\u2019re still not sure, consider speaking with a bankruptcy attorney<\/span><\/a>.<\/p>\n

Can an LLC File<\/span> for Bankruptcy?<\/h2>\n

The short answer is yes, an LLC can file for bankruptcy. Any LLC may file, including small-business LLCs and single- and multi-member LLCs.<\/p>\n

When an LLC files<\/span> a business Chapter 7 bankruptcy<\/span>, it differs from a personal filing. An LLC that files a Chapter 7 is liquidated without other negotiations. All assets are sold to pay secured debts<\/span>. There is no discharge of unsecured debt<\/span> because the LLC no longer exists.<\/p>\n

LLCs that wish to continue operation as functional entities should consider reorganization<\/span> or other alternatives. The Chapter 7 liquidation<\/span> completely terminates the LLC as an operating business.<\/p>\n

An LLC cannot file a Chapter 13 bankruptcy<\/span>. These\u00a0repayment plans<\/span>\u00a0are designed for individuals who need to pay off their debts over time. Small business owners<\/span> who want to keep their businesses and repay their debts need a Chapter 11 reorganization<\/span> instead.<\/p>\n

A partnership is not a separate legal entity<\/span>. Business owners in a partnership, like a sole proprietorship<\/span>, are personally liable for the company\u2019s debts. A partnership would not file for a Chapter 7 business bankruptcy<\/span>, even if the partners file for personal Chapter 7 bankruptcies<\/span>.<\/p>\n

How Does Bankruptcy Work<\/span> for LLCs?<\/h2>\n

When an LLC <\/span>files<\/span> for bankruptcy<\/a>, the company stops operating, and an automatic stay<\/span><\/a>\u00a0takes effect. This prevents creditors from coming after the company\u2019s assets. A bankruptcy trustee<\/span> will liquidate<\/span> all the company\u2019s assets and distribute them to secured creditors. This will be done in accordance with the priority provisions of the\u00a0U.S. Bankruptcy Code<\/span><\/a>.<\/p>\n

Filing for a Chapter 7 bankruptcy<\/span> ensures several things, including:<\/p>\n