Many entrepreneurs don’t know that there are three types of bankruptcy which they can file. They didn’t know they have an option. They used to think that bankruptcy is just one thing – usually a seizure or properties as he/she surrenders to his/her huge debts.
That is not the case; in fact, it’s far from it! You’ll later see in the following types that bankruptcy isn’t just one horrifying situation; far from it, or at least not as horrifying as you’d think.
Learn more about the 3 types and see the options for yourself:
Chapter 7 Bankruptcy (Liquidation of assets to pay off creditor fast)
This is the typical type of bankruptcy that comes to our mind whenever we think of the word “bankruptcy”.
Now, before you hate Chapter 7 for liquidating your assets, you should note that it’s still a choice; probably, as your last resort. In some cases, selling some of your assets is a good move to save the remaining ones.
But the whole point is that, this isn’t the only way to can resolve things. Lean more about Chapters 11 and 13 for an alternative of Chapter 7.
Chapter 13 Bankruptcy (Developing a repayment plan)
In Chapter 13, the debtor will have the chance to secure his/her assets and properties by presenting instead a repayment plan.
If you are able to present a repayment plan to your creditors, you are allowed to secure your properties for a certain period of time – usually 3 to 5 years. Just be sure to pay your debts well before that time period, or else still risk losing your properties.
Chapter 13 works best if you have a regular income. You can’t present a repayment plan if you don’t have an income coming in.
Chapter 11 Bankruptcy (Restructuring business to manage debts)
If you have a business, especially under a form of either partnership or corporation, Chapter 11 can best fit your needs.
In this bankruptcy type, your business is restructured to ensure the cash keeps flowing in while you get to pay your creditors. Just like Chapter 13, you are eligible to keep your properties here.
However, and of course, you have to ensure you pay your creditors well. Otherwise, your properties might be seized from you if you happen to not pay them well.
Bankruptcy is not just a surrender to your debts (and you properties). If anything, that’s the final option.
But if you are eligible and disciplined enough to pay off debts, you can actually secure your properties and save your business from total downfall.
Also, be sure to hire a bankruptcy lawyer to help you with these matters!