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Lawsuit forces company to file for Chapter 7 bankruptcy

Finding oneself in the middle of a lawsuit can be financially damaging to any individual. This can also be true for a business that is being named as a defendant in a lawsuit in Texas or in any other state. One wind energy equipment company is experiencing exactly this situation, which has forced the company to file for a Chapter 7 bankruptcy.

The company, Renewable Energy SD, was being sued by a state attorney general for fraud. Shortly after the lawsuit was filed against the company Renewable Energy decided to petition for bankruptcy. The company listed $15.9 million in debt, while reporting $6.2 million worth of assets, according to its bankruptcy petition filed with the court. A spokesman for the company stated that the lawsuit against the company forced it to file for bankruptcy because it did not have the necessary funds to pay for its legal defense.

Renewable Energy's bankruptcy petition's reported assets are not exact figures with most of the assets being speculative in nature. Approximately $6 million of the total $6.2 million worth of assets are proceeds which the company anticipates it will receive if it wins a lawsuit filed against Polaris America LLC and the CEO of Polaris. The lawsuit accuses Polaris of fraud as well as breach of contract.

By filing for a Chapter 7 bankruptcy the company is aiming to discharge all of its debts. However, when a business files for a liquidation bankruptcy in Texas or in any other state the business entity will no longer be in existence. On the other hand, the business owners will now be able to move on to their next business ventures and start with clean slates.

Source: Star Tribune, "Wind firm sued by state of Minnesota files Chapter 7 bankruptcy," Steve Alexander, June 24, 2013

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