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General Bankruptcy

Solutions to your Debt Issues

Some have described bankruptcy as a legal lifeline for individuals and businesses drowning in debt. It often involves a court trustee who manages the liquidation of assets and debt repayment and is approved and overseen by a judge. Bankruptcy laws were designed to help people who are facing financial collapse, giving them a second chance by starting over with somewhat of a clean slate. There are four types of bankruptcy available to individuals and/or businesses who find themselves in over their head and unable to keep up financially. They are described as follows:

Chapter 7 Bankruptcy

This type of bankruptcy is often called the liquidation chapter. Corporations, partnerships and individuals who need help to repair their current financial situation can implement Chapter 7. With this, the debtor’s estate (individual) or business assets are liquidated. Some assets are deemed exempt from liquidation. All assets not classified exempt are liquidated, and the debts owed by the debtor are repaid to the fullest extent possible. If a business declares Chapter 7, it will mean the end of the business as the doors must be shut to process this type of bankruptcy.

Chapter 11 Bankruptcy

Called the reorganization chapter by many, Chapter 11 Bankruptcy allows partnerships, corporations and sometimes individuals to reorganize their debts and create a repayment plan, without liquidating all assets and closing a business. Debtors present their plan to the court, which is then either approved or rejected. If approved, the debtor repays their debts per their redetermined plan and can once again become a productive business or individual. With Chapter 11 Bankruptcy, businesses can remain operational and even profitable during the bankruptcy process.

Chapter 12 Bankruptcy

This less known type of bankruptcy is primarily designed for family fisherman or family farmers who have regular yearly income. It allows distressed family fishermen and farmers to create and then follow through with a repayment plan to repay their debts at least in part. The repayment process can encompass three to five years. In most cases, though, courts demand repayment within three years unless “for cause” has been established to merit a longer repayment process.

Chapter 13 Bankruptcy

Known as “wage earners bankruptcy,” Chapter 13 is designed to give individuals a way out from under their debts. With Chapter 13, the debtor files a repayment plan with the court that outlines how they will allot a specific amount of their future personal income to debt repayment. The court will either approve or reject the proposed plan. If approved, the debtor will be under the court’s protection while repaying their debts.

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Who is a Good Candidate For Bankruptcy?

In general, a business or individual who has far more debts than money to cover them and doesn’t see this scenario changing anytime soon, is the best candidate for bankruptcy. In general, individuals file bankruptcy much more often than businesses. They get burdened down with personal financial obligations like student loans, auto loans, medical debts and/or mortgages and just can’t seem to keep their heads above water. In 2019, there were 774,940 bankruptcy cases filed. Of those, individuals filed 97% or 752,160, while only 22,780 were businesses.

How to Know it’s Time to File

If you have asked yourself the question, “should I file for bankruptcy?” or you know it will take you and/or your business longer than five years to repay your current debts and are struggling or unable to keep up with your payments now, you might be the ideal candidate for bankruptcy. Remember, bankruptcy isn’t designed to punish you, but to give you a second chance. Contact us today at (619) 304-9190 to learn more about how bankruptcy can help you, and to determine if you are a good candidate for the process.

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