Chapter 7 Bankruptcy
Chapter 7 bankruptcy will wipe out your debts and allow you to start over. However, not all debts may be discharged in a Chapter 7 bankruptcy, including alimony, child support, fraudulent debts, various taxes, and outstanding student loans.
Chapter 11 Bankruptcy
Reorganizing your business is the principal objective of filing for Chapter 11 bankruptcy. Individuals, corporations, and professional partnerships are often able to retain assets and operate their business while reorganizing and developing a repayment plan.
Chapter 13 Bankruptcy
Chapter 13 bankruptcy requires a 3-5-year repayment plan to creditors to pay off all or part of the debts using funds from future income. Chapter 13 allows you to avoid foreclosure, make up missed car or mortgage payments, pay back taxes, and more.
In 2019 Congress recognized that a streamlined, less expensive, small business chapter 11 could be lifeline to small business owners trying to get through an economic setback. As a result, in February 2020, Chapter 11, Subchapter V, became a bankruptcy filing option. Initially, the debt limit was $2.73 million. However, the federal stimulus program (CARES ACT) expanded eligibility this year to businesses and individuals with up to $7.5 million in debt. Now small business owners have the ability to quickly present a debt restructuring plan that may be approved even if creditors don’t like it (“cramdown”), the owner can continue in control of running the business, and the entire process should be quicker and less expensive.