Business Bankruptcy Essentials
business bankruptcy essentials
Financial Planning: Get Answers About Bankruptcy Before Its Too Late
The very word “bankruptcy” puts fear into many people’s hearts. For years, the word has been equated with being destitute, being unable to pay bills and being financially insecure. But is that all that bankruptcy is about? The truth of the matter is that many people simply don’t understand what bankruptcy really is. For many people, bankruptcy is a way out of a bad situation and a hand up when they need it most. It is also a life changing experience. These questions and answers are designed to teach you about bankruptcy, what it is, what it can do and what it cannot do.
What is bankruptcy?
Bankruptcy is a legal declaration of the inability to pay your creditors. This does not mean you have no money. On the contrary, many people who declare bankruptcy have enough money to live on. Instead, it means that you do not have enough money to match your basic living expenses and pay people to whom you owe money. How much this is can vary from person to person because every person needs a slightly different amount of money to meet their living expenses. Since there is no set amount, bankruptcy is often granted by a judge.
How do I apply for bankruptcy?
Laws very from state to state, of course, but applying for bankruptcy isn’t very hard. At its base, it simply requires the filling out of bankruptcy paperwork. This paperwork will ask you about various items, such as your current income and your current assets. Using this paperwork, the bankruptcy judge will decide if you qualify for bankruptcy and how it will work for you. You may want to speak with a lawyer before filling out this paperwork. A lawyer will be able to inform you of what kind of bankruptcy would best suit your needs and will help you identify some of the particulars.
How does bankruptcy help me pay my debts?
There are several different types of bankruptcy, all of which function in different ways. Businesses have several different versions of bankruptcy, some of which are useful for individuals. In general, should you need to file for bankruptcy, one of three things will happen. Either you will be required to pay a fixed amount per month until your debts are paid off, your assets will be liquidated and sold off to pay your debts and you will pay monthly to cover the rest, or your assets will be liquidated and sold off and then you will be absolved of any further debt. With any of these options, creditors can not attempt to collect above and beyond the agreed payment.
What are the most common types of bankruptcy?
The most common types of bankruptcy are called Chapter 7 and Chapter 13. A Chapter 7 type of bankruptcy is a basic liquidation. This is when the courts sell your assets, use the money to pay off creditors, and call it even. After that, creditors are not allowed to attempt to seek further payment. Chapter 13 bankruptcy is rehabilitation with a payment plan. This is the kind of bankruptcy you file if you have steady income. It cancels debts up to a certain date and fixes a payment per month for anything else owed. Under Chapter 13 bankruptcy, assets are not liquidated, but it does require certain amounts of payment every month.
What happens to businesses that file for bankruptcy?
Essentially, the same thing as happens to individuals. Either the business is shut down, their assets liquidated and their creditors paid off or they set up a payment plan and pay a certain amount per month. The only difference is when it comes to Chapter 13 bankruptcy and what is considered “disposable income.” For businesses, disposable income is generally taken to mean “profits,” although there is still some wiggle room here. Some less than honest business people will quickly give themselves a raise before filing, thus making it look like they make less profit than they do. However, barring small details, it is essentially the same for a business as it is for an individual.
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I presently have an unsecured debt of $25,000-30,000 to several credit card companies. My present situation do?
I presently have an unsecured debt of $25,000-30,000 to several credit card companies. My present situation does not allow me to put a dent into the debt balance. I believe filing for bankruptcy may be my only solution. I am called daily by the institutions I owe money to. I ignore them because at present there is no money to make any type of effort at re-payment. Other bills take priority over these unsecured loans. These include:child support, rent, utilities, and very basic living expenses. My question concerns what recourse these credit card companies have with regards to my business property. I am a sole proprietor. My truck and equipment is essential for me to make a living. So far I have received only idle threats from credit collection lawyers, but no legal summons from the court system. I have put off filing for bankruptcy with hopes of a better solution. What will be the consequences if I continue to ignore these credit institutions?
Filing bankruptcy is NOT your only solution, and should not even be under consideration for such a small outstanding balance!
Read the article at the first link below.
You have several options:
1) Debt negotiation. This would allow for a renegotiation of all of your debts to try to lower your interest rates and payments to levels that you can handle. This has the same (or better) result than a Chapter 13 bankruptcy, but without destroying your credit.
2) Debt settlement. This would allow you to set a payment level that is comfortable for you, and then your debts would eventually be settled for about 50% of what you currently owe. This takes 12-36 months, but is faster and cheaper than a bankruptcy.
3) Run and hide. Doesn’t work for everyone and won’t solve your situation, but is a very common method.
Get help! Contact National Consumer Rights Alliance (second link below). They can assist you with these options and others, and when it is all finished, they will help you fix your credit also.
You don’t have to ignore your creditors, and you can get them to stop calling you, but you have to know and enforce your rights. The experts at NCRA can help you will all of this.
Good luck!
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