It’s impossible to predict any financial hardships an individual or business might face, which makes understanding how to file for bankruptcy and when to file bankruptcy a powerful tool if unfortunate circumstances do ever come about. With an estimated 1,071,932 bankruptcy filings in the United States just in 2013, the chances of finding yourself in a position where you need to file, may be more possible thank you think. There are multiple chapters of bankruptcy that each serve different purposes and functions, but knowing which one will best fit your situation and understanding of how to file for bankruptcy, could keep your head afloat.
The most common form of bankruptcy, and the one people are most familiar with, is chapter 7 bankruptcy. This filing involves the liquidation of an individual’s assets in order to pay off a debt through the sale of their property. While individuals can use chapter 11 bankruptcy help, this chapter is most often used by corporations or partnerships and is the least common type of filing with only 8,980 chapter 11 bankruptcies occurring in 2013. Instead of liquidation of assets, this filing provides the debtor the ability to propose a plan of reorganization that will keep their business alive while they pay off creditors overtime.
The advantage that chapter 11 bankruptcy has over other chapters, is that during the reorganization, the debtor remains in control of their business operations as what’s called a “debtor in possession.” Their business is still subject to oversight and jurisdiction by creditors but they will be able to function as normal.
There are countless circumstances people may experience that will cause them to seek relief in filing for bankruptcy. For individuals it may be the loss of a job or unpaid medical bills; medical bills affected two million people in 2013. With markets fluctuating all the time, businesses must be prepared for reorganization and a plan to pay off their debts. Do some research online on how to file for bankruptcy and secure your financial well-being today.