Where does that leave unsecured creditors?
In most instances, frankly, it leaves them without any recourse. In fact, it is safe to say that the vast majority of unsecured debts owed by out of business corporations are never paid – not even in part. This is a basic fact of business life in the United States. Is it possible to pierce the corporate veil and attach liability to the directors? Or, if a new company has been formed, to hold it responsible for the defunct company’s debts? With significant legal effort, it may be possible. However, it should be underscored that such an effort will be an expensive endeavor to any creditor undertaking the task. The typical scenario for this battle will entail demonstrating to a court (in a lawsuit) that the principals either commingled their personal assets with those of the corporation or actually transferred the assets of the initial corporation upon its demise. Either is a very heavy burden under our legal system, requiring definitive evidence. Unsecured creditors may be tempted to com
