How Filing Personal Bankruptcy Is Different Than Business Bankruptcy
Within every section of the law there are subsections with different rules than the ones before.
The laws that govern bankruptcy are no different; there are separate chapters that can be filed and different rules for each chapter. The laws are sometimes so complex that certain attorneys only specify in one type of bankruptcy. If you are thinking about a hiring a bankruptcy attorney or even filing a do it yourself bankruptcy it is typical that you will be faced with sifting through information about the different types of bankruptcy. Here is some helpful information that highlights some of the differences between the various types of personal and and business bankruptcy:
1. Chapter 7 bankruptcy – This is the most common type of personal bankruptcy filed by either individuals or married couples. Businesses do not have the option to file Chapter 7 bankruptcy. In most cases Chapter 7 bankruptcy forms are used to erase large amounts of unsecured debt such as credit card debt and medical bills. It is typically beneficial for individuals or married couples that have little or no assets that could potentially be liquidated by the bankruptcy court in order to pay off some of their creditors.
2. Chapter 13 bankruptcy – This is the second type of personal bankruptcy available to individuals or married couples. Businesses also do not have the option to file Chapter 13 bankruptcy. In most cases filing the necessary Chapter 13 bankruptcy forms allows the debtor to take part in a 3-5 year repayment plan that encompasses a percentage of their overall unsecured debt. The percentage of debt involved in a Chapter 13 repayment plan can range from 10%-100% and is calculated by using the debtors disposable monthly income.
3. Chapter 11 bankruptcy – This type of bankruptcy is for businesses only and works similarly to how a Chapter 13 bankruptcy works for individuals. The bankruptcy court allows businesses to “reorganize” their debt and set up a payment plan that works for the business and its creditors. The repayment plans in both Chapter 11 and Chapter 13 bankruptcies are overseen by a bankruptcy trustee that makes sure payments are made on time and are correctly given to the creditors.
Typically, attorneys utilize the bankruptcy means test to determine the chapter of bankruptcy would best suit your needs. If you own your own business and feel as though a Chapter 11 business bankruptcy would benefit you it may be in your best interest to contact an attorney that specializes in that area. Filing a business bankruptcy does not necessarily mean that your business doors will be shut forever; in fact business bankruptcies aim to get finances back in order so that the business can not only stay open, but continue to grow. Filing a business bankruptcy does not mean that you must file a personal chapter of bankruptcy too, and if you are unsure about why or why not you should.