Increasingly, courts are allowing defunct corporations to proceed under the SBRA while individual owners of defunct businesses aren’t being treated as small business debtors in chapter 11.
Filing bankruptcy to gain a ‘litigation advantage’ in the N.Y. Attorney General’s dissolution action meant the chapter 11 petition was not filed in good faith and must be dismissed, Judge Harlan Hale rules.
The owner of defunct businesses was held ineligible to be a small business debtor because he was no longer the owner of an operating business. Being a non-owner executive of an operating business didn’t qualify him.