Even though a business in California may start out booming, it may end up floundering for various reasons, such as a slowdown in the economy. In one recent out-of-state case, a geothermal company has filed for Chapter 7 bankruptcy protection. The bankruptcy filing comes after the company had spent the past few years building wells locally.
Court records show that the company owes anywhere from $10 million to $50 million to creditors. It also has anywhere from a million dollars to $10 million in total assets. The company reported that it does not think it will be able to pay any of its unsecured debts.
According to the bankruptcy filing, the company has 27 creditors. These creditors included the state department of taxation and the Internal Revenue Service along with multiple private parties. A meeting with the creditors is slated to take place in early 2016. The company will have to go through the liquidation process to satisfy its debts.
In a Chapter 7 bankruptcy, or liquidation bankruptcy, a trustee is chosen to marshal, or accumulate, the company's assets after the bankruptcy filing. Then, liquidation takes place with the goal of acquiring as much money as possible for the creditors. Assets are then sold and reduced to cash, and creditors are paid under the supervision of the bankruptcy court. Afterward, the company's remaining debt is formally discharged. This type of bankruptcy essentially provides a struggling business owner with a fresh start financially so that he or she may take advantage of other possibly lucrative entrepreneurial endeavors in the state of California.
Source: heraldnews.com, "Klamath Basin Geopower files Chapter 7 bankruptcy", Stephen Floyd, Nov. 29, 2015