SOME CONSIDERATIONS TO KEEP IN MIND BEFORE FILING FOR BANKRUPTCY By Suzzanne Uhland

Some considerations to keep in mind before filing for bankruptcy Of course nobody wants to find themselves with the huge problem of accepting that the business is over. Nobody wants to ever file for bankruptcy. But sometimes it is just necessary or it is the last resource or it is just the right path to follow. When that day comes, it is better to be absolutely informed and prepared for the things to come as the road has not ended yet. There are too many things to consider when people file for bankruptcy and the process, in the simplest form, can take no less than 4 months. Some think that it is a simple process and that bankruptcy operates similar to small claims court, which concludes in one day, which is far from reality. Here are some considerations that will help you understand how to correctly file for bankruptcy depending on your needs and what you are willing to sacrifice to have a fresh start.

The most important thing you need to know is that there are many options that you can use when filing for bankruptcy and they are divided by chapters:

Some considerations to keep in mind before filing for bankruptcy

Chapter 7: it is often referred to as “liquidation” bankruptcy because it will cover most of your unsecured debt, including personal loans and credit cards. You will then have to comply with a test called “means test,” have a certain amount of income or some type of earnings, and in some cases you will be forced to sell any non-exempt assets, but in general, chapter 7 filers are able to keep most of their assets. Partnerships, limited liability companies, and corporations are all eligible to file bankruptcy under Chapter 7. Depending on their income, individuals who own and operate small businesses as sole proprietorships also may file for bankruptcy under Chapter 7. The entire process for this lasts about three or four months.

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Some considerations to keep in mind before filing for bankruptcy Chapter 13: this type of bankruptcy is often referred to as “reorganization” bankruptcy. This modality will give you the possibility of a repayment plan and force you to pay back your creditors over time. People don’t have to liquidate any property, but it may take three to five years to finalize everything. To become eligible for this type of bankruptcy, you need to have regular income to make the required monthly payments. The catch is that only individuals may file under Chapter 13, so it is not an option for businesses operated through partnerships, limited liability companies, or corporations. This chapter also has debt limits and an individual cannot file Chapter 13 if he or she owes more than $383,175 in unsecured debt or $1,149,525 in secured debt.

Some considerations to keep in mind before filing for bankruptcy Chapter 11:it is a form of repayment bankruptcy very similar to chapter 13 but only applies to certain creditors and it’s the only bankruptcy option for individual business debtors who want to reorganize and restructure but owe too much money to meet Chapter 13’s requirements. Generally, small businesses don’t like to file under Chapter 11, because it is expensive, risky, time-consuming, and complex. However, it is the only bankruptcy option for a small business that wants to restructure and continue in operation if it is owned by a partnership, limited liability company, or corporation. This chapter restructures finances through a plan of reorganization approved by the bankruptcy court. By reducing obligations and modifying payment terms, Chapter 11 helps debtors balance income and expenses, regain profitability, and continue in operation.

Some considerations to keep in mind before filing for bankruptcy After understanding where you stand in order to file for bankruptcy, there are other considerations to keep in mind. Filing for bankruptcy will open your finances to public scrutiny which could be a problem if you have a hard time even speaking about your income. Be prepared to expose your financial movements, including mistakes, to the public. If you file for bankruptcy protection, you will be required to attend a meeting of creditors. During the meeting, the bankruptcy trustee will ask you very hard questions in a public room and one of your creditors can also question you at the meeting.

As a small business owner, if possible, set aside a good amount of time to handle the load of paperwork and forms that will have to be filled during the process. Bankruptcy forms are very similar to confusing tax returns and nothing like the easy, "check the box" forms. The forms contain complex and tricky questions about your financial affairs and making mistakes in these forms can lead to legal issues. Before even filing for bankruptcy, please check the forms and be sure about the information that you will write on them.

Some considerations to keep in mind before filing for bankruptcy And last, filing for bankruptcy is not cheap. People see this option as their way out because they don’t have money to comply with their responsibilities, but it doesn’t come cheap. The cost depends on whether or not you hire legal counseling. And even if you prepare and file your own bankruptcy case, the filing fees alone are substantial.

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