Corporate Bankruptcy Attorneys: 5 Reasons a Corporation Cannot File Without One

A corporation that files for bankruptcy without a lawyer has not filed in any sense the court will honor. The petition may reach the clerk. It will not survive long, and the owner who typed it will have spent a filing fee to learn a rule older than the Bankruptcy Code itself.

The rule rests on five separate grounds, and they explain more than the prohibition. They explain who inside the company must act, what each signature on the petition means, and why the owner of a small LLC is in a different position from a sole proprietor down the street.

1. Two Centuries of One Rule

The Supreme Court stated the principle in Rowland v. California Men's Colony, 506 U.S. 194, decided in January 1993:

"It has been the law for the better part of two centuries . . . that a corporation may appear in the federal courts only through licensed counsel."

The case itself concerned a narrower question, whether an association could proceed in forma pauperis, and the Court held that only a natural person qualifies for that status. The counsel rule appears as settled background, and the litigant in the case was not a corporation at all but an unincorporated advisory council, which shows how far the principle reaches. Artificial entities act through agents, and in a federal courtroom the agent must be a lawyer.

Bankruptcy courts are federal courts. The rule follows the company inside.

2. The Petition Has a Line Only a Lawyer Can Sign

Official Form 201, the voluntary petition for non-individuals, contains two signature blocks. Item 17 is for the debtor's authorized representative. Item 18 is for the attorney, with a line for the firm name beneath it. There is no alternative block for a company without counsel.

Bankruptcy Rule 9011(a) supplies the reason the second line matters. Every petition must be signed by at least one attorney of record, and "a party not represented by an attorney must sign all documents." For an individual, that second sentence opens a path. For a corporation it opens nothing, because the corporation cannot be a party without a lawyer in federal court. The rule also directs that the court "must strike an unsigned document unless the omission is promptly corrected," which is how a petition filed by an officer alone tends to end: struck, or dismissed, and never heard.

3. Someone Must Hold the Authority to File

A lawyer is necessary, and not sufficient. The company must also decide to file, through whoever holds that power under its governing law. The Supreme Court addressed this in Price v. Gurney, 324 U.S. 100 (1945), a case in which shareholders filed a petition in the company's name after an attempt to have the corporation itself file had failed. The Court held that a bankruptcy court must determine whether a petition is filed by those with authority to file it, and that "in absence of federal incorporation, that authority finds its source in local law." If the people acting for the company lack that authority, the court "has no alternative but to dismiss the petition."

Local law means the law of the state that created the entity, and the company's own documents under it. A corporation ordinarily acts through its board; an LLC acts through its members or managers as its operating agreement provides. The practical result is a resolution, adopted before filing, that authorizes the petition and names the officer who will sign item 17. Counsel will ask for it. Counsel should also read the operating agreement or bylaws, because a clause requiring unanimous consent for a bankruptcy filing, or a lender's consent, can complicate the answer.

The harder cases involve divided owners. Two members of an LLC, each holding half, one wanting to file and one refusing, present a governance dispute before they present a bankruptcy case, and Price says the bankruptcy court is not the place to resolve it. Whether a member in that position has any route into bankruptcy other than a state-court fight over control is a question the Code does not answer and the operating agreement may not either.

The petition, in other words, carries three things into court: a lawyer, a signer, and the corporate act that joined them.

4. The Officer and the Lawyer Sign for Different Things

The officer who signs item 17 declares that the company requests relief, that the officer has been authorized to file, and that the officer has examined the petition and has "a reasonable belief that the information is true and correct." The form warns, above that line, that false statements in a bankruptcy case are a crime. Under 18 U.S.C. § 152, knowingly and fraudulently making a false declaration under penalty of perjury in a bankruptcy case is punishable by up to five years in prison, a fine, or both.

The lawyer's signature certifies something else. Under Rule 9011(b), by presenting the petition the attorney represents that, after an inquiry reasonable under the circumstances, it is not filed for an improper purpose, its legal contentions are warranted, and its factual contentions have evidentiary support. One signature speaks to the facts the company knows. The other speaks to the law and to the inquiry the lawyer made. You sign for what you know; your lawyer signs for what was checked.

5. The Sole Proprietor Is a Different Debtor

None of this applies to a sole proprietorship, because a sole proprietorship is not an entity. The owner files as an individual, may file without a lawyer, and must satisfy rules that do not reach corporations, including the credit counseling requirement that Section 109(h) imposes on "an individual."

The owner of an LLC who personally guaranteed its merchant cash advances can therefore stand on both sides of this line at once: barred from filing for the company alone, free to file in the owner's own name.

The Part That Is Not Legal Work

Delancey Street cannot be the lawyer this page describes. It is a debt settlement company, not a law firm, and it cannot sign item 18, draft a board resolution, or appear for a corporation in any court. What it provides is a confidential first review, free of charge, of whether a company's merchant cash advance and related obligations might be resolved by negotiation, with independently licensed counsel involved where the matter is legal. A corporation that needs the automatic stay, faces an active levy, or must bind holdout creditors needs corporate bankruptcy counsel, and should retain it before anyone prepares a petition. A corporation that does not may still want counsel's view before deciding. The rule of Rowland was never about bankruptcy alone; it is about who may speak for something that has no voice of its own.