Bankruptcy usually occurs when a person or company can no longer pay their creditors and have reached the point-of-no-return, of not being able to get further loans, or generate additional income to help the situation. This is usually a last resort and is fully controlled by the debtor himself.
Quite often a debt review will be instituted whereby the debtor’s household expenses are examined and the debt’s owing are assessed and a plan of action put into effect to pay off the debts. But should the debts be larger than can be covered, the debtor has the choice to file bankruptcy. The creditors are then contacted and given the opportunity to claim assets from the debtor, to cover outstanding debt – according to the laws of the different states.
Chapter 7 Bankruptcy
Chapter 7 Bankruptcy is filed primarily by business owners, sole proprietorship and even corporations. The object of this is so that they can continue to operate the business and avoid being liquidated. A court order is put into place and a court trustee does a debt review of their assets and liabilities. This will enable them to get an extended time to pay off the debts and in many cases have the debts reduced by the creditors and a payment plan put into place.
– Make a list of all your business creditors and the amounts owning to each.
– The list will include credit cards, office rental and leases on vehicles.
– Then make a list of your income from direct sales and
– A list of how much is owed to you, by your debtors.
– If your expenses far outweigh your income or potential income, and you are severely overdue with your payments, it is time to seek help.
Chapter 13 Bankruptcy
Chapter 13 Bankruptcy is also known as the ‘wage-earner’s plan’ is generally filed by individuals and home owners and even sole proprietors. The difference between the two is that with Chapter 13, the debtor reorganizes his debt and arranges to pay off his accounts, for three to five years under a restructured payment plan. This will prevent him having to liquidate his assets and the order will forestall foreclosure on his home. However, his current debt also has to be paid on time. dallas chapter 13 bankruptcy attorney can help you regarding the bankruptcy.
– Make a list of all creditors and amounts owed to them.
– List all monthly household expenses.
– List all income, including the spousal income and anyone else living in the home who is contributing to the household income.
– List all assets like retirement annuities and policies that can be redeemed.
– Subtract the monthly expenses from the monthly income to see the difference.
If the expenses far outweigh the income and there isn’t any way additional income can be generated, that will be the time to ask the court’s help.