Usually a company will choose to file bankruptcy because it cannot keep up with its payments on debts owed to creditors. This may be more common due to the difficult economic environment of late. However, there are instances in which creditors can force a company in Texas or elsewhere into an involuntary bankruptcy. This is what a biotech company, Nutra Pharma Corp., is currently facing. Its creditors are asking a judge to force the company into a Chapter 7 bankruptcy.
Attorneys for a group of creditors filed an involuntary petition to force the company into bankruptcy. Four of five claims were for unpaid salaries of officers or employees of a subsidiary owned by Nutra Pharma. The fourth claim was filed by MLB Marketing Corp. for $21,000. The largest claim came from the CEO of ReceptoPharm for $459,920. Another claim for $342,954 came from the Chief Science Officer of ReceptoPharm, which is a subsidiary of Nutra Pharma.
Nutra Pharma had previously warned its shareholders this summer of financial troubles. It told shareholders that the company was experiencing a shortage of funds, which could be detrimental to its business. This shortage of funds also caused the company to be delisted from the over-the-counter trading platform. So far, the company and its bankruptcy attorney have not commented on the involuntary petition filed by creditors.
Normally, a Chapter 7 bankruptcy is filed by a company in order to discharge any unsecured debts. This includes debts that are not attached to a physical piece of property. However, under this type of bankruptcy in Texas and elsewhere, a company's assets are liquidated in order to repay debts that were not discharged. This type of bankruptcy can also be filed by an individual, as well as, a business entity. While it remains to be seen what the result of the Nutra Pharma Corp. proceedings will be, bankruptcy may offer the opportunity to confront their financial issues in an orderly and protected manner.
Source: South Florida Business Journal, "Nutra Pharma Corp. faces involuntary bankruptcy," Paul Brinkmann, Aug. 31, 2012