Chapter 7 — Business.
When the right answer is to close cleanly.
Most firms try to sell a reorganization. Lone Star Counsel will tell you when liquidation is actually the disciplined path. A business Chapter 7 — done correctly — extinguishes the business cleanly, protects the owner's personal exposure where possible, and preserves the relationships you'll need for whatever you do next.
Discipline over denial
The hardest skill in restructuring is recognizing when the operating model has no forward path. We will tell you when it doesn't.
Owner protection
Personal-guarantee analysis, asset-protection review, and pre-bankruptcy planning where appropriate — your personal exposure is its own engagement.
Orderly wind-down
Employees, creditors, landlords, vendors, customers — there is a right sequence and a wrong sequence. The wrong sequence creates liability.
What comes next
Most of our Chapter 7 business clients have a Chapter Two. We structure for that from day one.
When business Chapter 7 is the right tool
- The business has no reasonable forward path — declining revenue, fundamental product or market mismatch, or capital structure that cannot be cured.
- There is no realistic appetite or runway to fund a Subchapter V or Chapter 11 reorganization.
- Owner is prepared to wind the business down and protect personal exposure separately if guarantees exist.
- Creditors are pursuing collection and the cost of defending exceeds remaining business value.
When business Chapter 7 is not the right tool
- The business is fundamentally viable and the problem is one specific liability — consider Subchapter V.
- The owner has substantial personal guarantees and no asset-protection planning yet — these matters require careful sequencing.
- There is a real out-of-court resolution available with creditors.
Business Chapter 7 vs. the alternatives
| Dimension | Chapter 7 (Business) This page | Subchapter V | Classic Chapter 11 | Assignment for Benefit of Creditors |
|---|---|---|---|---|
| Outcome for the business | Liquidation | Reorganization, business continues | Reorganization or sale | Liquidation outside bankruptcy |
| Timeline | 60–120 days | ~90 days to plan confirmation | 12–18+ months | 60–180 days |
| Owner continues to operate? | No | Yes | Sometimes | No |
| Public proceeding? | Yes — court-supervised | Yes | Yes | Limited |
| Personal-guarantee protection? | No — separate analysis required | No — separate analysis required | No — separate analysis required | No — separate analysis required |
| Best when… | No forward path; orderly close | Business viable, debt manageable | Large, complex restructuring | Texas-law liquidation outside the bankruptcy court |
The process — orderly business Chapter 7
Pre-filing analysis
Viability review, personal-guarantee mapping, asset-protection audit, alternative-paths comparison.
Wind-down sequencing
Employees, contracts, leases, vendors, customer commitments — the order in which each is handled is the work.
Petition filed
Voluntary petition. Operations cease at filing; the trustee takes possession.
Section 341 meeting
Meeting of creditors, typically 30–45 days post-filing. Owner testifies under oath.
Liquidation & distribution
Trustee liquidates assets and distributes to creditors per the statutory priority scheme.
Closure
Estate is closed. Business is extinguished. For most business Chapter 7s, owner moves to Chapter Two.
Frequently
asked.
Direct answers to the questions we are asked most often about this matter.
All firm FAQs