Bankruptcy can be the perfect way to get rid of personal and business debt and emerge with a clean financial slate. However, lawyers of Dallas based law firm say that personal and business bankruptcy have different chapters and rules.
Personal bankruptcy can be filed under chapter 7 or chapter 13. While chapter 7 is for people who have little to no income and cannot afford to pay back their debts, chapter 13 is for people with regular income. Such individuals repay their debt through a payment plan. Generally, individuals filing for chapter 7 bankruptcy get a bankruptcy discharge for the qualifying debts.
Business or corporate bankruptcy
Businesses can file for bankruptcy under chapter 7 or chapter 11. If bankruptcy is filed under chapter 7, the business needs to be dissolved instead of being reorganized. Chapter 11 bankruptcy option is available to businesses and corporations who wish to reorganize or liquidate their assets to repay their debts. The debtor can propose the repayment plan, but creditors also have the option of doing the same. Once the plan is approved by the creditors, it is implemented. Since chapter 11 is slightly complicated, individual bankruptcy filers opt for chapter 7 or chapter 13 bankruptcy.
Difference between personal and business bankruptcy
The biggest difference between personal and business bankruptcy is the means test to determine whether individuals qualify for chapter 7 or chapter 13. However, businesses do not need to pass this test for chapter 11 filing. Additionally, businesses can cancel the contract with the creditors if the option is financially favorable to both parties. Individuals do not have this option available for student loan debts or any other similar debts in bankruptcy.
Both individuals and businesses require legal consult if they are considering bankruptcy to get rid of debts. If you wish to seek consultation regarding your options to get rid of debts, you can call (888-297-6203) to consult with experienced bankruptcy.