Throughout life, there are instances when navigating finances can become overwhelming. For individuals and businesses experiencing unmanageable debt, filing for bankruptcy is a viable solution that can offer you a fresh start. There are, however, major differences between personal bankruptcy and business bankruptcy that you should understand before filing. If you’re investigating the possibility of bankruptcy for yourself or your business, here are a few ways the two types of bankruptcy differ, and tips you can use to decide which option is right for you.
Understanding Chapter 13 & Chapter 7 Personal Bankruptcy
When an individual files for bankruptcy, they’re able to eliminate their personal debt by either liquidating their assets or agreeing to a repayment plan with creditors. Individuals who want to can file either a Chapter 7 or Chapter 13 bankruptcy.
What Is Chapter 7 Bankruptcy?
This is the best solution for individuals with few assets who also have little to no viable income to repay their debts. Under Chapter 7 bankruptcy, debts are discharged and the person who owes the debt is no longer responsible for repayment. It also stops calls from creditors and prevents future collections of present debt.
What Is a Chapter 13 Bankruptcy?
This is a financial solution for individuals with income and assets who can manage a negotiated repayment plan. Under Chapter 13 bankruptcy, assets are seized to repay debts and any remaining debt is negotiated with creditors.
In both Chapter 7 and Chapter 13 bankruptcy, individuals who file should expect to undergo a means test that determines their eligibility for bankruptcy. Likewise, they should be prepared to participate in a series of interviews with a bankruptcy trustee to list their liabilities and assets.
For any individual considering bankruptcy, the best way to determine which type of bankruptcy to file is to speak with a trustworthy bankruptcy lawyer, someone with experience who will be able to help navigate the process and ensure a positive experience.
What Debts Are Exempt From Personal Bankruptcy?
It’s important to note that not all debts can be included in personal bankruptcy. Some loans, such as student loans, include a clause that prohibits negotiation or elimination of the debt in a bankruptcy case. Before an individual files for bankruptcy, they should talk to a bankruptcy lawyer to determine which of their debts are eligible for bankruptcy.
Filing for Chapter 7 & Chapter 11 Bankruptcy as a Business
When a business files for bankruptcy, the type of bankruptcy they file mainly depends on whether they want to remain in operation. For businesses that are ready to close their doors, Chapter 7 bankruptcy will eliminate debt and absolve the business. On the other hand, Chapter 11 bankruptcy reorganizes debt in order to keep the business open. Before a business can file for bankruptcy, the owners need to consider whether that business is viable. Likewise, the type of bankruptcy they file depends on how much of their personal money is invested and at stake.
The best way for a business to determine whether to file for bankruptcy and what type of bankruptcy it should file is to consult a trustworthy bankruptcy attorney.
Personal and Business Bankruptcy Attorneys in Louisiana
In the state of Louisiana, there’s no better bankruptcy firm than E. Orum Young Law. With more than 20,000 cases filed and 35 years of experience, the lawyers at our firm have filed more cases than anyone else in Northeast Louisiana. Whether you’re an individual or a business in need of assistance with your bankruptcy case, we can help you! Call our office at 318-450-3192 or contact us online today to schedule your free case review!