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Realty company owner files for Chapter 7 bankruptcy

One of the hardest hit industries during the recent recession was the real estate sector. Continuing economic troubles have had a particularly devastating effect on Texas real estate companies, and many have gone out of business in recent years. One Chapter 7 bankruptcy filing gives some insight into the struggles that face small business owners who operate realty companies, and demonstrates that there is help available when financial troubles compound and debt climbs to overwhelming levels.

The president and co-owner of real estate firm Rathbun Realty petitioned for Chapter 7 bankruptcy in mid-September, listing over $1 million dollars in debts and approximately $50,000 or less in assets. A Chapter 7 bankruptcy filing on the part of a business owner will result in the liquidation of company assets and the distribution of the proceeds to creditors. A meeting of the creditors in this bankruptcy procedure has been scheduled for November. Serious financial problems for the company began when company officials discovered that an employee had embezzled over $1 million from the firm. A police report on the matter was filed with local authorities in August of this year.

The company was also weathering another financial setback that resulted from a lawsuit filed by one of the company's rental property tenants, which led to a judgment against the company for nearly $112,000 in March of this year. In September, the state Department of Real Estate ordered the company to cease engaging in any real estate activity. The company, which managed approximately 800 residential properties at that time, has since ceded operations to an outside realty broker.

The co-owner of this realty firm has chosen to file for Chapter 7 bankruptcy protection, which has the power to discharge the majority of unsecured debts. This will allow the co-owner to continue on to the next chapter of her life and possibly begin a new business venture. The trustee will soon liquidate all of the company's assets in order to repay creditors. At the end of the day, while filing for bankruptcy may not be something that was anticipated by this co-owner, it may be the most financially responsible decision possible. As this case demonstrates, small business owners in Texas and elsewhere face a wide range of risks in operating any business, and economic factors can combine with other events to quickly threaten the financial stability of the business itself as well as that of the owners.

Source: Arizona Daily Star, "Rathbun Realty Files Chapter 7 Bankruptcy," Kimberly Matas, Sept. 25, 2012

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