Is Bankruptcy Right for You?

Bankruptcy is something that should be consulted about with a trained professional before deciding.   A competent bankruptcy attorney can provide the necessary information that can make a debtor decide what chapter works best for his/her situation or what would be the best course of action for the individual. 

There are a few things to consider when faced with the decision of whether to file for bankruptcy or take another course of action to limit or eliminate debt.

If the bankruptcy is for an individual or married couple, the debtor has to consider if he/she has enough limited assets to claim them as exempt property under Chapter 7.  If the debtor has too many assets or property to be able to claim them as exempt property under Chapter 7, he/she should consider moving from chaptery 7 to chapter 13.  Chapter 13 allows a debtor to keep his/her assets but the debtor must pay (buy back) a portion of the value (the non exempt value of the assets) to the creditors.  Another important variable in deciding whether to file for bankruptcy is the amount and type of debt as well as the type of income an individual has.  An individual with little or no income and mostly unsecure debt would be better served to file for Chapter 7 whereas an individual with a regular flow of income and mostly secured debt would be better off filing for Chapter 13.  The Means Test is designed to help an individual decide what type of bankruptcy would be better for their situation.

If bankruptcy for a business is the most viable option, the parties involved have to consider whether the bankruptcy can be reorganized under Chapter 11 or if the business has outlived its usefulness and should be liquidated under Chapter 7 or Chapter 13 (if eligible).  The business debtor has to consider the best options available to the business entity and the ultimate goal for that entity.  One important thing to consider is what type of business entity is it?  Different rules apply to sole proprietorships, partnership, and corporations.  Businesses such as limited liability companies (LLP’s or LLC’s), partnerships, and corporations are considered separate legal entities and can file for either Chapter 7 or Chapter 11 bankruptcy.  Keep in mind that if a partnership files for Chapter 7 bankruptcy, the court appointed trustee can sue the general partners for the difference between what the partnership's assets can cover of the outstanding debt and any balance of debt remaining after all the assets have been applied to the debt.  If the business is a proprietorship, the owner or owners have the option of filing for Chapter 7, Chapter 11, or Chapter 13.   

The most common forms of bankruptcy include:

• Chapter 7 (liquidation of debt under the Bankruptcy Code)
• Chapter 11 (reorganization under the Bankruptcy Code)
• Chapter 12 (family farmer or family fisherman bankruptcy)
• Chapter 13 (individual debt adjustment)
• Chapter 15 (ancillary and cross-border cases) 

If you or a loved one is considering bankruptcy, consult with an experienced and skilled bankruptcy attorney today to find out what Chapter of the bankruptcy code is better suited for your individual situation.

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+   Information about filing for chapter 7 bankruptcy
+   How to choose a bankruptcy lawyer before filing for bankruptcy
+   What you need to know about credit counseling services