Business and people can fail financially for a couple of reason. Sometimes, rebuilding without some legal help in managing your debt becomes impossible. This is where the different bankruptcy clauses come in.
They help you get the protection of a bankruptcy court as you come up with strategies to eliminate your debt. A good bankruptcy lawyer in Salt Lake City will help you file the right bankruptcy chapter depending on the kind of business you run — or how you operate your financial life.
Chapter 7 Bankruptcy Filing
Chapter 7 is the right way out for businesses or entities who have no future in sight. This approach focuses on liquidation and is taken when the debts are overwhelming. The business or person filing Chapter 7 has no hopes of picking themselves up and rebuilding their financial status.
This form of bankruptcy also works well in cases where the business wasn’t a substantial asset but was just an extension of the owner’s skills. Once the business is dissolved, a trustee takes charge of available assets and distributes them amongst all creditors.
Once the assets are depleted, the debtor is discharged and absolved of the debt regardless of whether the assets where enough to pay back everything or not.
Chapter 11 Bankruptcy
This is the best option in instances when there are chances of turning things around and recovering your business. All you need is some time to reorganize and continue to find your footing and resuming paying your debts.
The business or person filing for Chapter 11 will have to come up with a solid plan that will address the financial situation and pay the creditors. If the court finds the plan is fair, it approves it.
Chapter 11 is, however, not common because it takes longer to approve a plan and most plans are too complex that they end up failing. Many debtors and creditors avoid them at all costs.
Chapter 13 Bankruptcy
This is a common option for individuals or consumers. Even though sole proprietorships can also file this, it is popular among people who don’t own registered businesses. With Chapter 13, you still have to give a plan on how you plan to solve existing debts and how much you can repay.
The total amount you have to pay is determined by:
- Your earnings
- How much you owe
- The value of the property you own
Chapter 13 is a bit aggressive and could easily see you lose your home since it is considered an asset. To avoid this, your attorney will advise you to try Chapter 7 instead of Chapter 13.
Filing bankruptcy on your own, though possible, isn’t a wise decision. You need an attorney to help you gather the right documents and present your case well so that you can qualify for the type of bankruptcy you want. In addition to just helping you file, you also need the lawyer to take guide you into choosing the perfect chapter that will let you settle your debt without losing your core assets.