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Engineering firm files for Chapter 7 bankruptcy

In Texas, bankruptcy offers an opportunity for a business in financial duress to responsibly close the company, thus allowing its owners to move on to other investment opportunities while leaving the financial problems of the former company behind. One company in another state has filed for Chapter 7 bankruptcy for this very reason. The civil engineering firm known as Lakeshore TolTest lost lucrative foreign defense contracts and was also involved in a corruption scandal.

The company is said to have nearly 10,000 creditors. Its liabilities range from $50 million to $100 million, with assets falling in this same range, according to bankruptcy documents. The company’s website appears to have been taken down, and no one from the company has commented about the bankruptcy liquidation process.

The company was originally established as Lakeshore Engineering Services in 1994 and had more than $600 million in revenue after acquiring another company called TolTest. The company in 2011 was one of several that were suspended from entering into contracts with the local city sewer and water department because of its purported links to a scandal involving the city’s former mayor. Apparently, the company also had some contracts cancelled due to default in 2013.

During a Chapter 7 bankruptcy, the business is closed, and the company's assets are marshaled and liquidated. What has been reduced to cash is paid to existing creditors, and other unsecured debt is formally discharged. Secured debt is also liquidated, and any debt above the security is typically discharged as well. Chapter 7 bankruptcy can quickly help Texas business owners who are confronting significant debt to responsibly confront its financial obligations and ultimately achieve relief.

Source: Crain's Detroit Business, "Lakeshore TolTest files Chapter 7 bankruptcy", Chad Halcom, May 6, 2014

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