What is the Difference Between Personal and Corporate Bankruptcy?
Many businesses will have debts that they are unable to pay. Unfortunately, many of these debts most probably remain unpaid. Many companies use some form of bankruptcy to wipe their slates clean of debts that they cannot pay. Personal and business bankruptcies differ and have rules which determined by the various bankruptcy chapters available.
Personal Bankruptcy (Chapter 7 and Chapter 13 bankruptcy)
If you have a business and have very little income and have no hope of repaying business debts, then Chapter 7 bankruptcy is for you. The end result of this form of bankruptcy is a discharge of qualifying debt.
If your business has a reasonable income and can pay debts with a reasonable payment plan then a Chapter 13 bankruptcy may be the best option. This chapter is for individuals who can make their businesses work and manage their debt with a revised payment plan. Your business can remain operational.
A corporate or business may also file for a Chapter 7 bankruptcy if the business cannot pay its creditors and there is no chance of any recovery. This means complete shutdown of the entity. The assets are sold and funds are used to pay creditors.
With a Chapter 11 bankruptcy businesses or corporates can reorganize or liquidate their assets in order to pay their creditors. A Chapter 11 bankruptcy filing usually results in a reorganization. The debtor has a chance of proposing a reorganization plan. The reorganization plan must lay out the strategy of the company to pay creditors. Creditors have to approve the plan under the supervision of the bankruptcy court. In some cases, individuals can also file a Chapter 11 bankruptcy.
Difference between Personal and Business Bankruptcy
The major difference between personal and corporate bankruptcy is the means test. Individuals have to participate in this test to determine whether they can file for a Chapter 7 or Chapter 13 bankruptcy. Businesses are not required to participate in the means test to file for Chapter 11 bankruptcy.
If it would be financially favorable for both the business and the creditors, the business can cancel contracts with creditors. Individuals do not get the option of canceling contracts with regards to student loan debts and other types of debts that are exempt from bankruptcy.
Seek Advice from Business Debt Relief Experts
It is very important to seek professional legal advice if you or your business are failing to stay afloat and you are being hounded by creditors for outstanding debt and to clearly understand the difference between personal and corporate bankruptcy. Our experienced attorneys can advise you on the best options that are available to you in terms of bankruptcy. Creditors are more likely to take an attorney seriously. Furthermore, all correspondence from creditors can be directed to our offices attorney giving you the opportunity to focus on your business. In some cases, bankruptcy might not be the best choice for you. Our attorneys can also assist you with:
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