Many debtors are still terrified by the idea of claiming bankruptcy. It takes lots of energy and requires the help of professionals like DebtStoppers, specializing in bankruptcy law. Many business owners consider it as the acknowledgment of their fiasco in business. Yet, with a wise approach and professional guidance, bankruptcy can save and protect your business.
What Is Bankruptcy? Why Are We Afraid of It?
Bankruptcy is the way for individuals or companies to completely reduce their debts or cut them to pieces while suffering from losses. This action happens under the supervision of the United States Bankruptcy Courts. Debtors can file for bankruptcy on their own or can be forced to do it by creditors. Debtors who are unable to pay debts can declare the status of bankruptcy and prove their point of view in court.
There are different types of bankruptcy you can file for. Some of them are specific and can be applied only in rare cases for farmers of municipalities. Yet, there are common types as well that may be suitable for a wider audience. They are:
- Chapter 7. According to it, the debtor has to turn over all the assets or the majority of them to the trustee, except the exempt property like the furniture in the household, clothes, and small items. The trustee must sell all the property that you gave away and pay the debt that exists. After the assets are sold off, you can start from the beginning, without any debts. All of them are canceled. Yet, if you have school loans, alimony, or child support to pay, you will need to pay them.
- Chapter 11. This bankruptcy type is usually performed by business, and rarely by a debtor who has multiple assets. In this case, you have control over the daily operations of your business. You create the plan with creditors and trustees of how you pay the debts and whether they will postpone the deadlines.
- Chapter 13. This type allows you to keep all the assets untouched. Yet, you have to give away a significant amount of your income in the future. The size of the income you will give can be determined by the bankruptcy court or agreed with the creditor. You will pay the money until there is no debt left.
People Who File for Bankruptcy
Not everyone can do this. Besides, not every business owner wants to file for bankruptcy. The procedure might not take a long time but will have a long-lasting effect on the business. If you still want to do this, you need to consider the following aspects:
- Whether your creditors want to negotiate with you. Based on it, you can file either for 7 or 13 Chapter;
- Are you sure your liabilities exceed the assets you have? In case of bankruptcy, you can lose all your property;
- Whether this action will affect your and your business reputation;
- If you need to take the credit in the future.
To File or Not to File
Bankruptcy can solve many problems that seem to be too big to handle on your own. If you can’t pay your debts, the country can help you with them. Consider all your options and ask for the professional help of a bankruptcy attorney in advance.