Bad economic times can sometimes drive Tennessee businesses into financial tailspins. Chapter 7 bankruptcy enables business owners to liquidate assets and pay off as many creditors as possible. Bankruptcy proceedings can be complicated by accusations of waste and mismanagement if a business with significant positive cash flow in the past claims to have no assets left at the time of filing.
On Oct. 24, a Mt. Juliet-based construction company filed for Chapter 7 bankruptcy protection from creditors in federal court. The bankruptcy petition listed $7 million in liabilities but listed no assets. In the bankruptcy petition, the construction company claims to have had a gross income of $7 million in 2011.
The company's $7 million debt is owed to two insurance companies. According to court documents, one of the companies issued surety bonds to the construction company based on alleged misrepresentations about the amount of cash the company had on hand. The insurance company sued the construction company and its president in civil court for providing false bank statements.
The other insurance company also has a civil suit pending against the bankrupt construction company. According to a news report, the plaintiff was recently awarded a partial default judgment against the construction company's president.
Substantial cash flow does not always mean that a company is profitable. If a business is facing overwhelming debts, the best solution may be to file Chapter 7 bankruptcy and conclude business matters. Whatever the business decides, it needs solid advice on how to proceed.
Source: Nashville Business Journal, "TG Constructors seeks Ch. 7 bankruptcy protection," Annie Johnson, Oct. 24, 2012