Can a Not-For-Profit file for chapter 7 or any other chapter of bankruptcy?

Typically Not-for-Profits can file Chapter 7 or Chapter 11 depending on what they plan to accomplish. Section 109 of the code specifies what can and cannot be a debtor or who can and cannot file Chapter 7. You may want to look for a qualified attorney in your state to look at it closer.

A non-profit corporation may file for Chapter 7 or Chapter 11 in most instances, although such filings are somewhat rare. Keep in mind that the consideration of whether one can is entirely different from the consideration of whether of not one should. In order to make that determination, I would strongly advise that competent local counsel be sought within your jurisdiction.

To further address the question, why is the non-profit filing for bankruptcy protection? The non-profit is a corporation. It is normally not a good idea for a corporation to file for bankruptcy protection unless it has assets to be distributed to creditors. What kind of assets does the non-profit have vs. the amount of debt. Many times it is just a good idea to wind down the business and close it. Typically the CPA or attorney who helped set up the non-profit can help shut it down too. Remember that non-profits have unique tax considerations and they should be addressed with the CPA and/or attorney.

A non-profit entity, being a corporate entity, can file for chapter 7 (see 11 USC sec.109). The basic reason for filing bankruptcy is to either protect assets that can be exempt, or deal with debt that cannot be handled outside bankruptcy. An examination of the assets and debts should give you a clear picture of whether or not a chapter 7 would benefit the entity. A non-profit cannot file a chapter 13 as that chapter is reserved for individuals. However, chapter 11 would be available to corporate entities.

A non-profit can file a bankruptcy petition, not unlike a for profit company, but I am always somewhat interested why they would chose such a course of action to wind up a company. Often, in almost any circumstance, it is better to seek a dissolution of the company and keep a bankruptcy trustee and the United States Trustee out of your business. In any regard, you would be well served to speak to competent non-bankruptcy counsel about this issue.

Consider the Philadelphia Orchestra's decision to seek bankruptcy protection. The orchestra is relatively good financial shape and will continue performances, but needs to restructure its contractual obligations -- in particular, its pension fund contributions. For board talking points on whether to file bankruptcy: http://www.lawyersalliance.org/pdfs/news_legal/July_09_Board_Talking_Points_Bankruptcy.pdf - BensonBankruptcy.com