Longtime members of The Kansas City Club, located at 918 Baltimore St., are likely disappointed to hear that the 133-year-old business is closing its doors forever. The Kansas City Star recently reported that the local mainstay had previously planned to reorganize its debts and reopen in a new location. However, the now-padlocked iconic club is set to file Chapter 7 bankruptcy, liquidate its assets and shut down.
The club owes $1.17 million to three different lenders for mortgages on the building. The building is by far the largest asset of the club, which the filing estimates to be worth $1.9 million. Luckily for the unsecured creditors, the combined debts are $1.45 million, meaning they will likely be paid after the secured debts to the banks are paid off.
How Does Chapter 7 Work for Business Bankruptcy?
Chapter 7 bankruptcy for business is an ideal solution when a company is behind on its debts and wants to close down. (This is in contrast to Chapter 11 bankruptcy, where businesses can reorganize debt to remain open and continue operations.) In Chapter 7 for businesses, the trustee will sell off any remaining company assets to pay off creditors. There is a significant difference between Chapter 7 for individuals and Chapter 7 for businesses, however. In an individual bankruptcy, the remaining debts will likely be discharged after any salable assets have been liquidated. For businesses in Chapter 7, once all the assets have been liquidated, the trustee will simply file a final report without a discharge, as the business is closing anyway.
If the bankruptcy petition filed by The Kansas City Club is accurate, there may be money left over after all assets are sold and all creditors are paid. When that happens, the business owners are able to keep the remaining funds from the liquidation.
The Sader Law Firm – Business Bankruptcy Attorneys