Understand bankruptcy law before you file
In most cases, a bankruptcy claim is initiated by the person or company that is unable to repay their creditors. Although bankruptcy law is intended to allow the business owner to regain some financial control, state bankruptcy laws will determine exactly what assets or property the debtor can keep and what they must offer as payment.
The best bankruptcy route for you depends on the nature of your debt. Unsecured debt, such as credit cards or medical expenses, can lead you in one direction, while business debt to customers may lead you in another. Neither the decision to file nor the filing process is a simple one. Fortunately, expert advice can help you deal with your debt and keep your life and business afloat through trying times.
Personal Bankruptcy Laws
Some bankruptcy laws can apply to a range of businesses, but they may not be the best choice for yours. Take Chapter 7 bankruptcy law, which essentially allows debtors to walk away from their debts by selling their assets. This means that the creditor cannot badger the debtor for money over the phone or through any other form of communication, including legal action. But is this the best course of action for your situation? Is walking away from your debt your only option? There are alternatives to filing for Chapter 7 relief—depending on the nature of your business or personal circumstances, you may be able to restructure your debt payments instead and avoid a potential loss of property.
For businesses that don't wish to dissolve, Chapter 11 bankruptcy law may be worth considering. In this case, the assets of the business are not liquidated; instead, the debt is restructured to allow for eventual repayment. Of course, the terms are not completely favorable for the debtor—they lose complete control of business operations, though an "automatic stay" protects the debtor from litigation.
Chapter 13 bankruptcy law is similar to the restructuring program of Chapter 11, but it applies to individuals instead of businesses, and it targets those with a specific amount of debt and level of income stability.
While all bankruptcy laws are ultimately designed to relieve financial burden, they have different requirements and lead to different outcomes for your life and assets. Bankruptcy lawyers are trained to find the best solution for a specific business, individual and type of debt.
How a Lawyer Can Help
Regardless of the type of bankruptcy you wish to file, the process can be a strenuous one. You need to file a number of documents with the court to present your case, from schedules of unexpired leases to tax returns. This process requires a host of official forms and costs, and some thorough research to ensure that you have met all requirements for the particular bankruptcy law. With changes to bankruptcy laws and the numerous steps to take, it can be very difficult to file on your own; the procedure operates on a timeline as well, so a lawyer's firm understanding of the procedure can really save you from wasting effort, time and money.