What liens can be avoided in bankruptcy?
• Certain judgment liens [except arising from domestic support obligations]. • Nonpossessory, nonpurchase money security interest in certain household goods that the debtor has exempted. • Wholly unsecured mortgages can be avoided in chapter 13. Can a federal tax lien be avoided in chapter 7? No. An incorporated business is ceasing operations. Should it be bankrupted? A corporation filing bankruptcy is entitled to retain no property and receives no discharge of debts. There is no requirement that an insolvent corporation file for bankruptcy and for that reason state law dissolutions or simply walking away are common. Good reasons to file a corporation into chapter 7 might include: • To stop a creditor from executing on valuable assets that could otherwise be utilized to pay favored creditors (e.g. trust fund taxes, wage claims or personally guaranteed debt). • To recover preference payments that could be used to pay favored creditors. • To help insulate the principals from allegations
