This morning I came across a press release issued by a California bankruptcy lawyer, touting the firm’s ability to discharge over $4 million in debt for someone by filing a Chapter 7 bankruptcy for them. And though at first blush it seemed like a tremendous feat, buried in the press release was a single tip-off that this might not have been such a big deal.
In the release it was noted that the person needed to file for bankruptcy because their business had failed.
Why was this a critical piece of the puzzle? Because when you file for Chapter 7 bankruptcy and have primarily (in other words, mostly) business debt then the landscape changes dramatically. You aren’t subject to means testing, and your case can’t be dismissed for having too much income. In fact, the circumstances under which your case can be dismissed are pretty small.
End result? When you’ve got primarily business debts your Chapter 7 bankruptcy case gets a lot easier in many ways.
A few things to remember, though. If the business is a sole proprietorship and still in operation you’re going to be forced to shutter it when you file for Chapter 7 bankruptcy. If its a partnership then your partner is going to need to be involved to some extent (they won’t have to file for bankruptcy with you, but they will be involved to the extent the business is involved). If it’s a corporation then the trustee may be able to sell your shares and use the money to pay creditors.
Business bankruptcies are more complex for a lot of reasons, but simpler for you in terms of your ability to get out of debt and start over. Costs are higher because of the bigger paperwork and record-keeping requirements, but if you look at it from strictly a “do I qualify?” perspective, filing for Chapter 7 with business debts is in many ways an excellent solution to your problems.
Photo courtesy of bcostin.
Check Out These Related Posts:
