Liquidating services

She returns as much book inventory as possible to the publishers, lowering the amount she owes them to ,000, and notifies them in writing that she's going out of business.

She then sells off her used book inventory as well as her bookshelves, cash registers, and computers (mostly to a competitor, the rest on craigslist), leaving her with ,000 in cash.

And you won't have to pay the costs of bankruptcy (court and lawyers' fees).

So if you feel an ethical duty to creditors and want to see that they receive as much money as possible, this may be the way to go.

On the other hand, if you are personally liable for some business debts because you signed some personal guarantees or because you're a sole proprietor or a partner, you'll absolutely need to get all of your creditors to settle with you and release your from the debts.

If even one creditor refuses to release you from a debt you're personally liable for, all of your other settlements may be for naught, if the creditor sues you and takes your property or you end up having to file for bankruptcy anyway.

She gives notice and pays her landlord the ,000 past due—this is a high priority because she personally guaranteed the lease—and writes checks to the utilities.

Darla then writes to each of the publishers offering a final payment of 50 cents on the dollar (,000 to satisfy her debts of ,000).

You can simply close the business, sell its assets, and pay your creditors on a pro rata basis until the business's cash is exhausted.

If you are sued, you'll at least have to file a response in court pointing out that you aren't personally liable for the debt, and you may have to hire a lawyer or appear in court.

Worse, a creditor might even argue that your corporation or LLC was just a sham to help you defraud creditors and that it was really just you running the business (this is called trying to "pierce the veil" of the corporation or LLC).

She makes the offer contingent upon the publishers' signing a written release that releases Book Nook, Darla, and her spouse from any liability for the debts.

The publishers, knowing that Book Nook is an LLC and that Darla can either walk away from the business or file a Chapter 7 business bankruptcy, much prefer getting half their money immediately, so they take the deal.

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