Facts About Business Bankruptcy

Every year more than 1,200,000 Americans file for protection under the federal bankruptcy laws. Some have abused their credit or are financially irresponsible. However, some people who try to pay all of their bills can find themselves in financial trouble. Medical bills, a divorce or the loss of a job can quickly wipe out a life’s savings. For these individuals, bankruptcy can provide a second financial chance. You may want to talk with a bankruptcy attorney to see if you really need to file bankruptcy, or if an agreement can be reached with your creditors.

What Is Bankruptcy?

Bankruptcy can allow a debtor relief from excessive debt by providing a fresh start. You are able to discharge some or all of your debt and it allows you time to get back on your feet without harassment by creditors. Bankruptcy laws can also benefit creditors by giving them a means to collect at least partial payment of a debt in a timely manner.

Filing for bankruptcy is a difficult decision. For some it carries a stigma of failure or irresponsibility. In fact, the majority of people who file for bankruptcy intend to pay their bills but can’t. By filing for bankruptcy, you are given a clean slate, free of the stress that results from financial problems. Before making such a decision it is important to speak with a bankruptcy attorney.

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Chapter 7

In Chapter 7 bankruptcy, your nonexempt property may be sold by a bankruptcy trustee, who then makes partial payments to your creditors. You may keep a partial interest in certain assets, such as your home, car, clothing, household appliances and furnishings, life insurance, pensions and tools of your trade. In most cases, you may not have to give up any of your personal property. You may usually choose either the exemptions provided for in the Bankruptcy Code or those allowed under your state law, whichever is most beneficial. Creditors retain the right to any collateral you have pledged to secure a loan.

Chapter 11

Chapter 11 bankruptcy is generally used to reorganize a business, although individuals are also eligible. This type of bankruptcy allows a business to continue operating while repaying creditors through a court-approved plan.

Chapter 13

If you have a regular income, Chapter 13 bankruptcy provides a method for repaying your debt over a period of time, according to a court-approved plan. The period of time allowed ranges from three to five years. Under the new bankruptcy law just passed by Congress debtors who can repay a lump sum of $10,000 would be forced to file under Chapter 13, and those who can pay either 25 percent of their debt or $100 a month for five years would be forced to accept a repayment schedule.

The following are some common bankruptcy topics:

• Bankruptcy Act
• Bankruptcy Court
• Bankruptcy Trustee
• Chapter 7 Bankruptcy
• Chapter 11 Bankruptcy
• Chapter 13 Bankruptcy
• Debtor
• Creditor

Contact a bankruptcy attorney today.