In this tough economic environment, many companies face financial difficulties. When they become too much to handle, some may choose to file for bankruptcy. In some more challenging cases, companies either choose to convert or are converted to Chapter 7 bankruptcy by the courts if their financial situations worsen while under a different set of bankruptcy protections. Chapter 7 protection allows a company to discharge its unsecured debt while liquidating some assets.

Readers in Jackson may be interested in this recent news story. Over the Labor Day weekend, a city mayor in another state discovered that the company responsible for garbage pickup for half of the city had converted its Chapter 11 bankruptcy filing into a Chapter 7 case. Unable to make payroll, the company had ceased operations. This left garbage sitting in driveways for days awaiting pickup while the city scrambled to find a suitable replacement.

A company out of a nearby city offered to fill in for $150 per hour but could not begin garbage collection until that Tuesday due to dump hours over the holiday weekend. The mayor reported that trash bins were overflowing, and some locations had trash sitting out for over a week.

Chapter 7 bankruptcy gives a company a chance to start fresh after dismissing its unsecured debts and working to handle secured ones. As this case shows, though, bankruptcy can also come with some challenges. Understanding the many laws and regulations involving Chapter 7 cases can help a business discharge its debt and business owners determine how to proceed in the future.

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