Filing Bankruptcy: A Comprehensive Guide for Individuals and Businesses
Bankruptcy is a legal process that allows individuals and businesses to reorganize or eliminate their debts when they are unable to pay them. In the United States, there are several types of bankruptcy, each with its own eligibility criteria and benefits.
Eligibility for Bankruptcy
- Individuals must meet one of the following requirements to file for bankruptcy:
- Cause a debt crisis, such as medical bills or credit card debt.
- Be an involuntary involuntary debtor, meaning you can't pay your debts on time.
Businesses also need to meet certain eligibility criteria to file for bankruptcy. This includes being a corporation, partnership, or limited liability company (LLC), and having sufficient assets to wipe out some or all of its debts.
- Chapter 7: Liquidation bankruptcy - allows individuals and businesses to reorganize their assets to pay off creditors.
- Chapter 11: Reorganization bankruptcy - allows businesses to reorganize their debts and continue operating while restructuring them.
- Chapter 13: Wage earner's plan - allows individuals to create a repayment plan to pay off debts over time.
Each type of bankruptcy has its own set of rules, benefits, and limitations. Understanding these differences is crucial for determining the best course of action for an individual or business facing financial difficulties.