Falling behind on bill payments is unsettling for any person, family, or business. No one wants unpaid bills piling up, but circumstances sometimes make it impossible for hard-working people to get ahead. The end result often leads to the embarrassment caused by harassing phone calls from creditors, car repossessions, garnishment of wages, home foreclosures, and even lawsuits. Fortunately, the law recognizes that honest people often get caught in the quicksand of debt, and filing for bankruptcy offers hope for future financial stability.
Bankruptcy can also be thought of as a "fresh start", and although many negative connotations are associated with the process, it is a rather common occurrence. In 2016, nearly 820,000 bankruptcies were filed in the United states alone. It is not uncommon to accumulate debt so substantial that it may feel as though there is no way out.
Bankruptcies for Individuals
Individuals may file for either chapter 7 or 13 bankruptcy.
Chapter 13, also called the "wage earners plan", can be used by the debtor to pay back either all or a portion of the debt over a period of 3-5 years.
A Chapter 7 is essentially where the bankruptcy trustee seizes all non exempt assets of the debtor and liquidates them to pay off debts to creditors. Although, frequently most debts can be discharged through Chapter 7 bankruptcy, there are some which cannot be eliminated such as student loans and spousal / child alimony.
Bankruptcies for Businesses
Businesses such as, sole proprietorships, partnerships, corporations and, LLC's can benefit from a Chapter 11 bankruptcy.
This plan is very similar to that of a chapter 13, however, Chapter 11 is designed for a debtor with much greater debt than that of an individual. Just like with a Chapter 13, a Chapter 11 is a plan of reorganization that allows the business to repay its debtors while still remaining in operation.