Section 16.22 Chapter 7 Proceedings

• Library: Bankruptcy Practice (2007 Ed. + 2015 Cum Supp)

1. (§16.22) Chapter 7 Proceedings

At the outset, it is important to note that corporations, partnerships, and other business entities cannot have any of their debts discharged in a Chapter 7 bankruptcy proceeding. 11 U.S.C. § 727(a)(1). The purpose of this rule is that, if corporations and other business entities are in the process of liquidating in Chapter 7, they do not need a discharge of their debts because state law already addresses the treatment of unpaid debts in business dissolutions. To permit corporations, partnerships, and other business entities to discharge their debts in a purported “liquidation proceeding” could result in the “trafficking in corporate shells” and in bankrupt partnerships. S. Rep. No. 95-989, at 7 (1978), reprinted in 1978 U.S.C.C.A.N. 5787, 5884.

With respect to individual debtors, there are three broad
categories of tax debts that are nondischargeable...