Bankruptcy is a great way to discharge debt so that you can move forward with a clean financial slate. It’s proven to be an effective tool for both consumers and businesses, but it’s important to know that bankruptcy is not the same for consumers and business.
Consumer Bankruptcy – Chapter 7 and 13
Chapter 7 bankruptcy is the most commonly filed bankruptcy for individuals who feel they will not be able to pay back acquired debt. In this form, assets are sold and the money gained from the sale of assets is used to pay back creditors.
Chapter 13 bankruptcy is for individuals who have debt, but have enough income to eventually pay back creditors through a repayment plan.
To determine what form of bankruptcy you will file as a consumer, you will need to take the “means test.” During this test, you are required to supply information about your income. Based on that, it will be determined if you have enough money to pay back creditors through a repayment plan (n Chapter 13) or if you do not have the “means” to back back creditors, and thus need to file Chapter 7.
Corporate and Business Bankruptcy – Chapter 7 and 11
Businesses are able to file Chapter 7, but the company is then dissolved. Assets are then sold off to pay back creditors.
Chapter 11 bankruptcy is the most common form of bankruptcy filed by businesses. This form allows businesses to either reorganize or liquidate assets to repay creditors. Usually Chapter 11 filings lead to reorganizations where the business is allowed to continue operations while paying off creditors.
Individuals are allowed to file Chapter 11, but this is rare and usually reserved for individuals that have a large amount of money.
Businesses do not need to take a means test to qualify for Chapter 11 filing.
Working with a Bankruptcy Attorney
Bankruptcy can be an overwhelming process. That’s why we advise that you work with a phoenix business bankruptcy lawyer that is familiar with various debt repayment options. We are committed to helping our clients understand their rights and options under the bankruptcy law and developing the debt relief solution that makes the most sense for each individual. We invite you to call (602) 648-3274 or contact our Arizona office to schedule a free initial consultation.
668 N. 44th St., Ste 320, Phoenix, AZ 85008