In the past, many people viewed bankruptcy as a taboo topic; however, it is now growing in popularity. The bankruptcy process can prove to be quite beneficial for various people.
In particular, the Chapter 7 bankruptcy process can be helpful to certain business owners. To take full advantage of the benefits of this option, it is important to understand key aspects of a Chapter 7 bankruptcy.
Not everyone qualifies for a Chapter 7 bankruptcy. Applicants must meet certain criteria, including
- Pass the means test.
- Income must be below the state median income.
- Debt must require more than half of monthly income.
Along with meeting the requirements to apply, applicants must follow the official bankruptcy procedure. The federal government sets the procedure; however, certain state rules may apply as well. For this reason, it is critical that applicants understand the full scope of the process before applying.
The business type and desired bankruptcy outcome determine the type of Chapter 7 bankruptcy a party should file for. In the case of those who have sole proprietor businesses, in the eyes of the government, that party is his or her own business. Therefore, a personal filing covers both the party and the business. On the other hand, when a party has a business incorporated outside of him or herself, the bankruptcy filings would be separate. If a party desires to dissolve all ties to the business, he or she must file for a personal and business bankruptcy.
As with any bankruptcy filing, the major draw is being able to detach oneself from debt. In the case of a business bankruptcy filing, a party is able to find relief from a failing business, which many business owners face, statistically. This debt freedom can allow parties to start over.
The bankruptcy process can be complex, but worth it. Consider how a Chapter 7 bankruptcy may benefit you.