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Investment firm filing for Chapter 7 bankruptcy

In these difficult financial times it is not uncommon to see businesses struggling with debt. Customers and clients are tightening their belts, leaving businesses with products or services that are going unsold. This overwhelming debt can lead to financial challenges including unpaid bills and lawsuits. Thus, when these businesses are unable to pay creditors, a Chapter 7 bankruptcy filing may be one of the few options available to satisfy the debt. One boutique investment firm is going through this process right now.

The investment firm was founded by a former Lehman Brothers employee and was one of the two underwriters of a $460 million public offering by FriendFinder Networks Inc. The firm claims it has between $1 million and $10 million in debt that it hopes to satisfy by liquidation of its $10 to $50 million worth of assets.

The process of filing for Chapter 7 bankruptcy is complicated. In the business context, once the filing is made a trustee is assigned to oversee the liquidation of assets and to raise money to pay creditors. In many instances, this means the business is completely shut down. Creditors are then paid depending on whether or not they are secured and their priority. A bankruptcy attorney is pivotal in walking a business through the Chapter 7 process.

Chapter 7 for businesses may allow the business owners to have a fresh financial start. The financial challenges once felt while dealing with a struggling business will be taken care of and the business owners can move on with their lives. Debt relief like this is available through the legal system and should be considered as a real option by troubled business owners.

Source: Reuters, "Boutique investment bank Ledgemont seeks Chapter 7 bankruptcy," May 6, 2013

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