An individual or business entity may opt to file for bankruptcy as a way to handle an issue related to debt or other financial difficulties. One of the most important things to know about bankruptcy is that there are different options available. For instance, individuals might benefit most from Chapter 7 or 13 bankruptcy while businesses generally opt for Chapter 11.
Chapter 7 is a liquidation bankruptcy — if a business files for this type of protection, it will be shut down for good. Chapter 13 bankruptcy allows for debts to be reorganized and repaid over the course of three to five years. Those who are thinking about filing for bankruptcy should understand that there are fees associated with doing so. In addition to the financial cost of such a decision, an individual may see his or her credit score go down significantly after filing.
Bankruptcy may not be the best way to handle debts such as alimony or student loans. Tax debts are also unlikely to be discharged in any type of bankruptcy setting. Debtors may also have to attend a meeting with their creditors. During this meeting, disputes might be brought up by creditors and upheld by the court. This may mean that a debtor would be responsible for this debt even after the bankruptcy process is completed.
Debtors who are facing financial challenges may benefit from bankruptcy and the protections it could provide. In some cases, it can put an end to creditor contact or make it easier to restructure debt payments. An attorney might be able to explain more about how to file or who may be eligible for Chapter 7, 11 or 13 bankruptcy protection.