The pandemic has been a tragedy for everyone worldwide, changing our habits revolving around our livelihoods and visiting loved ones. Unfortunately, many people are seeing their debts pile high as the pandemic continues to impact their lives, businesses, and careers. This has led to a predicted increase in business bankruptcy filings for business owners and individual filings for everyone else.
What Types of Bankruptcy Are There?
Despite the negative social stigma, bankruptcy does not equivocate to financial ruin. Depending on the type of bankruptcy filed, sometimes businesses are able to continue to operate under a restructured company and financial plan. There are four different types of bankruptcy filings and knowing which option is best for your future is a decision you should make after consulting with your bankruptcy attorney.
Chapter 11 Bankruptcy is specific to businesses, and is known as business bankruptcy. It involves restructuring the company so that the business may continue to operate.
Chapter 7 Bankruptcy is considered a “fresh start” and involves the liquidation of assets to help pay for debts.
Chapter 13 Bankruptcy requires the development of a payment plan, in which your loans are restructured to be repaid within 3 to 5 years at a more manageable interest rate.
Chapter 20 Bankruptcy is an informal type of filing, that essentially combines the Chapter 7 and Chapter 13 bankruptcies, filed in subsequent order. The initial filing discharges debts that cannot be paid under the Chapter 7 filing and then creates a payment plan for the manageable debts under the Chapter 13 filing.
Oftentimes people facing bankruptcy are confused about which type of filling is best suited for their needs. It is highly recommended to speak with a qualified attorney early in the process so that they can advise you on your best course of action. Businesses can only file Chapter 11, and are unable to file Chapter 13 which is reserved for individuals.
Is Bankruptcy Right for Me?
Many people, however, think that bankruptcy is the right choice for them when in fact it can cause financial harm. Filing for bankruptcy is typically only advisable for individuals who do not see any other way that they can pay back their debts. Additionally, there are certain types of debts that are not dischargeable, meaning that a bankruptcy will not wipe them clean. Furthermore, you must meet strict qualifications for filing bankruptcy and many people later discover that they do not qualify. Having conversations with your bankruptcy attorney at the early stages of your financial plan is essential to a better outcome.
How Has the Pandemic Changed Business Bankruptcy?
As anticipated, the pandemic has caused a wave of bankruptcy filings from corporations and small businesses alike. Fortunately, one of the changes that the pandemic has created is lessening the negative social stigma of filing for individual and business bankruptcy. Many people have had their lives financially uprooted by the unprecedented restrictions that the pandemic has created and requiring financial assistance of any kind has become commonplace.
Additionally, there are social programs for individuals, families, and business owners alike that may be able to provide financial assistance to help your recovery. If those options, however, have already been exhausted, and you don’t anticipate being able to pay your debts, then a bankruptcy filing might be the best plan to take control of your finances.
While the collective attitude toward bankruptcy filing has changed, the legal process remains the same. Due to the intricacies of the law, it is highly advisable to speak with a bankruptcy attorney in order to discuss your financial future. Please don’t hesitate to call our offices today to schedule a free 30-minute consultation.