Liquidation Tools for Miami Businesses

A Miami business that can no longer pay its debts has more than one way to close. Chapter 7 bankruptcy is the option most owners have heard of, but Florida law offers several alternatives, and the right choice depends on what the business owns, who it owes, and whether the owners signed personal guarantees. The wrong choice can expose owners to lawsuits, waste value that could have paid down guaranteed debt, or leave the company's affairs open for years. This page explains the principal liquidation tools available to Miami businesses, the statutes that govern each, and the deadlines that control them.

Chapter 7 Bankruptcy for a Miami Business

A corporation, LLC, or partnership may file a voluntary Chapter 7 petition under 11 U.S.C. § 301 in the U.S. Bankruptcy Court for the Southern District of Florida, which sits in Miami. Filing triggers the automatic stay under 11 U.S.C. § 362, which immediately stops lawsuits, garnishments, and collection efforts against the business. A trustee is appointed under 11 U.S.C. § 701 and takes control of the company's assets. The trustee's duties under 11 U.S.C. § 704 include collecting property of the estate, liquidating it, examining claims, and distributing proceeds to creditors in the priority order set by 11 U.S.C. § 726.

Two features of business Chapter 7 surprise many owners:

• No discharge for entities: Under 11 U.S.C. § 727(a)(1), only an individual receives a discharge. A corporation or LLC that completes Chapter 7 is liquidated but its debts are not erased. In practice this rarely matters because the entity stops operating and has nothing left to collect, but it does mean the filing itself does not protect guarantors.
• Loss of control: The moment the petition is filed, management no longer decides what gets sold, to whom, or for how much. The trustee also investigates the company's pre-filing conduct, including transfers to insiders within the past year (or longer under Florida's fraudulent transfer statute, Fla. Stat. Chapter 726, which the trustee can use through 11 U.S.C. § 544). Payments to owners, repayments of shareholder loans, and asset transfers to a new entity can all be clawed back. We explain what that review looks like on our page about the Chapter 7 trustee's investigation in Miami cases.

The mechanics run on a fixed timetable. The meeting of creditors under 11 U.S.C. § 341 is set roughly 21 to 40 days after filing, and a company representative must appear and answer the trustee's questions under oath. Schedules and a statement of financial affairs are due with the petition or within 14 days under Fed. R. Bankr. P. 1007.

Chapter 7 makes sense when the business faces multiple lawsuits, when creditors dispute how assets should be divided, or when the owners want a court-supervised process that ends creditor pressure quickly. It makes less sense when the assets are modest and the owners could sell them and distribute proceeds without the cost of a federal case.

Assignment for the Benefit of Creditors: Fla. Stat. Chapter 727

Florida's assignment for the benefit of creditors, often called an ABC, is a state-court liquidation governed by Fla. Stat. §§ 727.101–727.116. It is the most common bankruptcy alternative for Miami companies, and for many closely held businesses it is faster and cheaper than Chapter 7.

The process works like this:

1. The assignment: The business executes a written assignment transferring all of its assets to an assignee, a private fiduciary chosen by the company (usually an experienced liquidator or turnaround professional). The form of the assignment is prescribed by Fla. Stat. § 727.104.
2. The petition: The assignee files a petition in the circuit court where the assignor's principal place of business is located. For a Miami business, that is the Eleventh Judicial Circuit in Miami-Dade County.
3. Notice and claims: The assignee gives notice to creditors and publishes notice of the assignment. Creditors must file proofs of claim within 120 days of the filing date of the petition, and under Fla. Stat. § 727.112 late claims are barred from distribution unless the court orders otherwise. This claims bar is one of the ABC's most useful features: it fixes the universe of claims early.
4. Liquidation and distribution: The assignee sells the assets, often as a going concern, and distributes proceeds under the priority scheme in Fla. Stat. § 727.114. Secured creditors retain their liens; administrative costs, wage claims, and taxes are paid ahead of general unsecured creditors.

Compared with Chapter 7, an ABC gives the business a voice in selecting the fiduciary, generally moves faster, and attracts less publicity. Its main limits: there is no automatic stay against secured creditors or landlords equivalent to 11 U.S.C. § 362 (though Fla. Stat. § 727.105 bars most creditor actions against the assigned assets), and the assignee cannot assume and assign leases over a landlord's objection the way a bankruptcy trustee sometimes can. A creditor unhappy with an ABC can also file an involuntary bankruptcy petition against the company under 11 U.S.C. § 303, which would supersede the state proceeding.

A worked example: a Miami wholesale food distributor owes $400,000 to a bank secured by all assets, $250,000 to trade vendors, and $30,000 in back wages. A competitor will pay $500,000 for the inventory, trucks, and customer list, but only if the deal closes within 60 days. Chapter 7 would likely be too slow and too public to hold that buyer. An ABC lets the assignee close the sale quickly, pay the bank's lien from proceeds, pay wage priority claims under § 727.114, and distribute the remainder pro rata to vendors who file timely claims within the 120-day window.

Secured Party Sales Under UCC Article 9: Fla. Stat. § 679.610

When a lender holds a security interest in the company's equipment, inventory, or receivables, the lender can foreclose on that collateral without any court proceeding. Fla. Stat. § 679.610 authorizes the secured party to sell the collateral after default, provided every aspect of the sale is commercially reasonable. Fla. Stat. § 679.612(2) treats notice sent at least 10 days before the sale as sent within a reasonable time in a commercial transaction.

Sometimes a struggling business cooperates with its lender in a consensual Article 9 sale: the company surrenders the collateral, the lender sells it to a buyer identified in advance, and the sale proceeds reduce the guaranteed debt. This can be the fastest liquidation tool available, often closing in weeks. The risks fall on the owners. If the sale brings less than the debt, the lender can pursue a deficiency judgment against the company and any guarantors under Fla. Stat. § 679.615(4)(b). Owners should never assume that surrendering collateral ends their exposure; the guarantee survives the sale.

Corporate Dissolution and Winding Up: Fla. Stat. Chapter 607

A solvent or modestly insolvent company can wind down on its own by dissolving under Florida law. A corporation dissolves by filing articles of dissolution with the Florida Department of State under Fla. Stat. § 607.1403; an LLC follows Fla. Stat. § 605.0707. Dissolution does not make debts disappear. The company continues to exist for the purpose of winding up: collecting assets, paying creditors, and distributing anything left to owners (Fla. Stat. § 607.1405).

The statute gives dissolved companies two tools for cutting off claims:

• Known claims: Under Fla. Stat. § 607.1406, the dissolved corporation may send written notice to known claimants stating a deadline for submitting claims, which must be at least 120 days after the notice's effective date. A known claim not received by the deadline is barred.
• Unknown claims: Under Fla. Stat. § 607.1407, the corporation may publish notice of its dissolution. Claims not brought within four years after publication are barred.

Directors who distribute assets to shareholders before paying creditors face personal liability under Fla. Stat. § 607.1406(8) and under Florida's fraudulent transfer law. The order of payment matters: creditors first, owners last.

Receiverships

A receivership is a court-supervised remedy in which a judge appoints a neutral to take custody of property or a business. For commercial real property, Fla. Stat. Chapter 714 (Florida's Uniform Commercial Real Estate Receivership Act) governs appointment, the receiver's powers, and sales. Receiverships are usually initiated by a creditor or a litigating co-owner rather than by the business itself, but a Miami business locked in a shareholder deadlock or a mortgage foreclosure may find that a receivership becomes the vehicle through which its assets are liquidated. Owners served with a receivership motion should respond quickly; once a receiver is appointed, management's authority over the receivership property ends.

Choosing Among the Tools

The decision usually turns on three questions. First, is there litigation that needs to be stopped? If so, the automatic stay favors Chapter 7. Second, is there a going-concern buyer? If so, the speed and flexibility of an ABC or a consensual Article 9 sale usually preserves more value. Third, how were insiders paid in the last year? If there are transfers a trustee would attack, the owners need to understand that exposure before choosing a forum, not after.

The Owners' Personal Exposure

Liquidating the entity is only half the analysis for most Miami small businesses. Owners commonly guarantee the bank line, the SBA loan, the lease, and vendor accounts, and they may owe trust fund taxes personally under 26 U.S.C. § 6672 regardless of what happens to the company. After the entity closes, collectors often turn to the guarantors directly; our page on FDCPA protections against collection calls in Miami covers the limits on that conduct. If the guaranteed debt is more than the owner can pay, a personal filing may follow the business liquidation. Because guarantee debt from running a business is usually business debt rather than consumer debt, many owners are exempt from the means test entirely. Start with our overview of Chapter 7 qualifications in Miami, and if consumer debts predominate, see how current monthly income is calculated for the eligibility analysis.

Sequencing matters here. An owner who files personal bankruptcy before the business winds down hands the trustee the ownership interest in the company. An owner who winds the business down first, documents that creditors were paid in the proper order, and then addresses the guarantees usually gets a cleaner result. We plan both stages together.

You can contact the Law Offices of Albert Goodwin by phone at 786-522-1411 or by email at [email protected].