Bankruptcy Can Offer the Fresh Start You Need
The bankruptcy process is deeply rooted in our system of government. In fact, it is included in Article 1 of the United States Constitution. It is a legal process in which individuals and businesses who qualify can either get rid of certain types of debt altogether or repay their debt under a court-approved plan.
Bankruptcy is not the right choice for everyone and not everyone is eligible. However, if you are living under mounting debt and cannot seem to get ahead, if you want a fresh start, or if you have suffered a hardship that will render you unable to repay your debt, bankruptcy may be the best option. Contact Law Offices of Kerry P. O'Brien at 562.308.0733 to request your free bankruptcy evaluation.
Chapter 7 Bankruptcy Explained
Also known as liquidation or straight bankruptcy, Chapter 7 bankruptcy is a court-supervised process in which the debtor’s assets are sold and any proceeds are given to their creditors. As the debtor, there are many exemptions you can claim to protect your assets. If, after those exemptions have been taken, there are no assets left then the case is what’s known as a “no-asset” case and your unsecured creditors get nothing.
Once the Chapter 7 bankruptcy is discharged, the debtor no longer has any personal liability for their discharged debts – but there are additional steps a bankruptcy attorney can help with. For example, the debtor must pass a means test before they can file. If the bankruptcy is approved, the debtor must attend two credit counseling sessions and they may be audited.
In the event a person’s income is too high as decided by the means test, Chapter 7 is not an option. That’s not the end of the story though – Chapter 13 is still available.
Chapter 13 Bankruptcy Explained
Sometimes referred to as a wage earner’s plan, Chapter 13 bankruptcy offers debtors a repayment plan. It is available for those who have a regular source of income and is often the default choice for a person who does not qualify for Chapter 7 due to their income.
The main benefit of Chapter 13 over Chapter 7 is that it allows the debtor to keep assets such as homes, vehicles, and boats. The debtor pays the creditors back over a specific amount of time – generally three to five years. During that time, the debtor is protected from lawsuits, creditor harassment, wage garnishments, and other debt-collecting actions.
Chapter 13 is also a broader bankruptcy option that allows for more debt to be discharged than can be discharged by a Chapter 7.
Business Bankruptcy Explained
In most cases, a business owner who needs to file for bankruptcy for business debt that they cannot repay should file for personal bankruptcy – either Chapter 7 or Chapter 13. For example, it is common for a business owner to sign a personal guaranty for a business loan. Even if their company is an LLC or corporation, the business owner has taken that debt on individually and the best way to avoid a lawsuit would likely be to file a Chapter 7 or Chapter 13.
In instances in which it does make the most sense for a corporation or other business entity to declare bankruptcy, there are several options. When you work with Law Offices of Kerry P. O'Brien, we can assess your situation and provide the information needed for you to make the most informed decision.
Some of the most common types of business bankruptcy include:
- Chapter 9. Chapter 9 is a reorganization that can only be filed by municipalities such as villages, counties, cites, and school districts.
- Chapter 11. The most common type of business bankruptcy, Chapter 11 is a reorganization plan in which the business entity continues operating and repays their creditors through a court-approved plan. The end result of Chapter 11 is most often reduced debt and a reorganized company.
- Chapter 12. Only certain industry-specific companies can file Chapter 12, such as farmers and fishers.
- Chapter 15. This type of bankruptcy applies only to cross-border cases in which the debtor and / or their property is subject to both U.S. laws and the laws of at least one foreign country.
Call Today for a Free Bankruptcy Consultation
Is bankruptcy the right choice for you or your business? The best way to find out is to get a free legal evaluation from Law Offices of Kerry P. O'Brien. Call us at 562.308.0733 now to get started.