Chapter 7 and Chapter 13 bankruptcy are two of the most common types of bankruptcy. These are types of bankruptcy that all individual consumers use, as well as some businesses. However, there is also another type of bankruptcy used by businesses—Chapter 11. Whether you are a small business owner or part of a partnership which is overwhelmed by debt, knowing the differences between Chapters 7, 11, and 13 bankruptcies may help you make decisions concerning your next financial move.
Of course, no matter which type you choose, it’s best to have the assistance of a qualified bankruptcy lawyer and receive a personalized professional opinion. Our lawyers can explain which method is the best for your situation.
What Is Chapter 7 Bankruptcy?
Chapter 7 bankruptcy is used by individuals as well as businesses. This type of bankruptcy is preferred when recovery and repayment seems too farfetched to be a reality in the near future. Rather than reorganizing debts in order to pay them off, people and companies can file Chapter 7 bankruptcy, and when it is discharged, they walk away knowing that the debt has been cleared.
It may mean losing some assets, but they also lose the debt that accompanied them. For business owners, Chapter 7 means it is time to close the doors on that particular business, but nothing prevents them from opening another similar business. Get more information about Chapter 7 bankruptcy here (http://www.zerodownbankruptcy.com/chapter-7/).
Chapter 11 Bankruptcy Basics
Most sole proprietorships use Chapter 13 when they want to reorganize their debt and continue doing business under the same business name and license. However, limited liability companies, partnerships, and corporations are not allowed to use Chapter 13 bankruptcy, so they turn to Chapter 11 when they want to reorganize their debts.
Chapter 11 is only used by sole proprietorships when either their unsecured debts exceed $383,175 or their secured debts exceed $1,149,525. It can be an expensive method because of the different people and details that go along with it, but Chapter 11 does offer the advantage of keeping the business alive. It has a couple of other advantages as well, which include the following:
- The company in question may sell off any assets in order to pay past or current debts.
- The company may downsize the business as a whole in order to use earnings to pay off debts.
- The company does not have to close its doors but can continue to operate under a restructured financial system.
Chapter 13 Bankruptcy
Individuals and sole proprietorships both commonly use Chapter 13 bankruptcy. This type of bankruptcy does not wipe out debt, and it comes with limits. Limited liability companies, partnerships, and corporations cannot use this method to reorganize their debt. Instead, they have to use Chapter 11, which is a bit more detailed and requires more debt than Chapter 13. Chapter 13 bankruptcy allows businesses and individuals the opportunity to restructure their payment plans so they can afford to pay off as much debt as possible. It also allows businesses to continue to operate. Click here for more information about Chapter 13 (http://www.zerodownbankruptcy.com/bankruptcy-lawyer-st-petersburg-florida/chapter-13/).
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