Chapter 7 Bankruptcy 101
Is your business in financial trouble? Considering that the economy is in a recession, many people are having problems with their finances. If you do not sell a product or a service that is in high demand during tough times, then it is most likely that your business will see a significant drop in revenue if you do not change your approach. When jobs become scarce, people become extremely reluctant to spend money. Instead of helping to keep the economy rolling, individuals decide to hold onto their cash, which puts other people out of a job. It is a vicious cycle.
If your business is one of those that is contemplating filing bankruptcy, you should first consider the other options. Restructuring your business to make it more profitable, hiring an outside financial accountant, and liquidation are all options that should be considered before you make a trip to the bankruptcy court. Even your creditors would prefer that you explore all other options before you file as bankrupt.
When a company files for bankruptcy, they can file for either Chapter 7 bankruptcy or Chapter 11 bankruptcy. Chapter 7 is in place for either businesses or individuals who are unable to pay back their creditors in any way and need to liquidate their assets immediately. This type of bankruptcy is known as straight bankruptcy. It is often the last resort because every non-exempt asset is immediately in possession of the court, everything is sold off, and the revenue generated is split among your creditors. In all likelihood, there is nothing left over for you once your creditors are paid.
Chapter 11 bankruptcy, though not ideal, is still a better option than Chapter 7. It involves the reorganization of the business so that it can continue operating and pay back its creditors on a different time schedule. The bank assigns a person to your case who is to work with you on reorganizing your business plan. Their job is to help you stay in business while giving you a structured way to pay back your creditors in full. The majority of Chapter 11 bankruptcies do not work, however, and these companies end up filing for Chapter 7 bankruptcy in the end.
Jane Worthington
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3 Responses to “Chapter 7 Bankruptcy 101”
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what is chapter 7 bankruptcy and how is it different from the others?
Look, I just have about 800 dollars in debt. I don’t know what to do, I have no job, and I don’t know which chapter bankruptcy would be the best method to go with?
Ok. I understand you dont have income right now, but 800 is a figure that credit card companies would work with you for. The cost of filing for bankruptcy is far higher then 800. I recomend that you call your credit card company and see what solution they offer.
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That is WAY too little debt to attempt BK. It would cost you more than that just to file.
Get a job, then start paying.
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