A business or an individual may file bankruptcy in order to reorganize or completely eliminate debt. Declaring bankruptcy will give you a fresh start and protect you from creditors.
The 3 primary types of bankruptcy are Chapter 7, 11 and 13. Chapter 7 liquidates the assets of any business to pay outstanding debts. The debtor lists all property and can claim exemptions where legally allowed. This is the most extreme option, and is used by those with a tremendous debt and limited assets.
Chapter 11 is a form of debt repayment that restructures a business under the direction of a court-appointed trustee. This allows businesses to continue to operate and reorganize debt.
Chapter 13 allows the debtor to submit a plan to repay creditors through the bankruptcy court. The debtor must pay as much of the debt as possible, but will not have to pay the entire amount. When preparing for a bankruptcy filing, there are several things to remember:
1. Attorney and filing fees will apply.
2. Your credit report will carry a business bankruptcy notation for 7-to-10 years after you file.
3. It may be difficult to obtain new employment after declaring bankruptcy.
Action Steps
The best contacts and resources to help you get it done
Choose a bankruptcy attorney
Consult with an attorney who will help you decide which of the above types of bankruptcy you should file for. The attorney will give you bankruptcy advice and make sure your paperwork is filled out properly. Making just one mistake on the paperwork can cause the court to reject your filing. The initial consultation with an attorney is usually free, but you should find out ahead of time about all the fees you will be faced with. Attorneys charge using different methods, so some may charge a standard fee while others charge according to the amount of debt. After the initial meeting, you will have to give the attorney detailed information about your company's finances, attend a "341 meeting" with your creditors and turn over non exempt assets to a court-appointed trustee for Chapter 7 or submit a 3-5 year repayment plan for chapters 11 and 13.
I recommend: Contact the people at
Price Law Group,
Moran Law Group or look for an attorney near you in the
lawyers.com directory.
File for an online bankruptcy
You may wish to avoid hiring an attorney and file for bankruptcy online. It is possible to save a lot of money by filing online since you can avoid attorney fees. Find a site that provides online assistance and guides you through the process.
I recommend: Visit
AOAL.net or
1ClickBankruptcy.com to file bankruptcy online.
Sign Here offers an array of legal documents that you can request online, including chapters 13 and 7 bankruptcy.
Purchase bankruptcy software
There are software programs that will give you bankruptcy information and help you through the process of filing. This allows you to handle the process on your own.
I recommend: Try the software packages from BlumbergExcelsior Inc.,
New Hope Software Inc. or
National LawForms Inc..
Tips & Tactics
Helpful advice for making the most of this Guide
- Before you file, contact creditors and explain your situation. Ask whether they would be willing to temporarily reduce your monthly payment and suspend interest charges and late penalties.
- When hiring a bankruptcy lawyer, meet with several until you find one you feel comfortable working with and who will work within your budget.
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