Understanding Bankruptcy: What It Can and Can't Do
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Bankruptcy is a federally governed legal process in Mckinney Texas, that provides debt relief for individuals and businesses unable to meet their financial obligations. Bankruptcy also helps people who can no longer pay their debts get a fresh start by liquidating assets to pay their debts or by creating a repayment plan. Veronica Deaver offers bankruptcy attorney services to clients in McKinney and Plano and nearby areas. Learning what happens when you declare bankruptcy and its benefits can help improve your finances. If debt feels overwhelming, bankruptcy may be worth considering. Knowing its advantages and limits helps evaluate its fit for your needs.
Bankruptcy can stopping lawsuits, wage garnishments, and most debt collection efforts.
The Ultimate Guide to Navigating Debt Relief with Bankruptcy It also clears debts like credit card balances, medical bills, and personal loans. Not all debts are discharged. You’ll still owe student loans (unless undue hardship is proven), unpaid child support, alimony, and recent tax debts. This guide explains what to expect from bankruptcy, detailing how Chapter 7 and Chapter 13 work, the specific features of Chapter 13, and what bankruptcy can’t resolve.
What to Know About Filing for Bankruptcy: Chapter 7 vs. Chapter 13
Bankruptcy can help those overwhelmed by debt by eliminating certain obligations for a fresh start. The main types—Chapter 7, Chapter 13, and Chapter 11—each offer unique benefits and debt relief solutions. Individuals may file Chapter 7 or Chapter 13 bankruptcy, depending on the specifics of their situation.
Avoid These Mistakes Before Filing Bankruptcy
Filing for bankruptcy is more than just paperwork. Steer clear of common errors to ensure a smooth Chapter 7 or Chapter 13 process. Financial stress might tempt quick fixes, but proper planning is key. Here’s what to avoid before filing:
- Filing at the wrong time
- Unnecessary use of retirement funds
- Careless or incorrect paperwork
- Buying luxury items or taking cash advances
- Selling or transferring property below its value
- Prioritizing select creditors
- Filing before acquiring assets like inheritances
- Not filing tax returns
Can You File for Bankruptcy in Texas If Unemployed?
Yes, unemployment does not prevent you from filing for bankruptcy in Texas. You can file for Chapter 7, and being unemployed might make you more likely to qualify since the “means test” considers income levels. If your income is below the median for your household size, Chapter 7 is often the best option. Consult with a Texas bankruptcy attorney to assess your specific financial situation. What exemptions does Texas have for Chapter 7 bankruptcy
Sole Proprietor & Small Business Bankruptcy
If you’re a small business owner or sole proprietor facing financial difficulties, we can guide you to the best debt relief options. We evaluate your situation to determine whether Chapter 7 or Chapter 13 bankruptcy is more suitable, helping you make informed decisions to secure your business’s future.
Understanding Bankruptcy: What It Can and Can't Do
Discover the pros and cons of Chapter 7 and Chapter 13 bankruptcy. For many small business owners, bankruptcy can be a lifeline, helping their business survive and even thrive. The choice between Chapter 7, Chapter 13, or Chapter 11 depends on your business type, structure, and financial situation, including debts, assets, and whether income can support a repayment plan.
What Happens When a Business Declares Bankruptcy?
When a business files for bankruptcy, the outcome depends on the chosen chapter. Businesses can primarily file under Chapter 7 or Chapter 11, with Chapter 13 being an individual option beneficial for some business owners. Understanding these basics is crucial for making informed decisions.
Chapter 7 Bankruptcy: Liquidation for Businesses
Overview of Chapter 7 Bankruptcy In Chapter 7, a trustee sells business assets to pay creditors. Most businesses that choose Chapter 7 either close before filing or during the process. It’s the fastest and most cost-effective bankruptcy type.
Chapter 11 Bankruptcy: Business Reorganization
Chapter 11 focuses on restructuring, allowing a business to continue operations while figuring out a repayment plan with creditors. Though effective, Chapter 11 is lengthy and expensive. The streamlined Chapter 11, Subchapter V, offers a more affordable option for small businesses.
Chapter 13 Bankruptcy: Owner Reorganization
Business bankruptcy isn’t as common as perceived, especially Chapter 7. Strategic use of bankruptcy by business lawyers often proves more effective due to the limitations and pros and cons of each chapter.
Should You or Your Business File for Bankruptcy?
The best bankruptcy option depends on whether you intend to close or maintain your business. If you want to continue operating, refer to “Continuing Your Business: Factors to Consider.” Otherwise, learn about the best fit for your circumstances in Chapter 13 and 11 sections.
Chapter 7 Bankruptcy for Corporations and LLCs
For corporations and LLCs, Chapter 7 offers a transparent method to close and liquidate the business. In this process, a bankruptcy trustee is appointed to sell off assets and distribute the proceeds to creditors.
Why Small Businesses Rarely go for Chapter 7
- No Debt Discharge: Small businesses (except sole proprietors) don’t get a debt discharge, so owners with personal guarantees remain liable unless they file personal Chapter 7.
- Asset Liquidation: A business entity cannot protect its assets in bankruptcy. The trustee will sell everything to pay creditors, causing the business to close.
- Cost Considerations: Owners can often wind down operations without incurring additional costs of court and attorney fees.
Strategic Asset Sales
Business owners might obtain higher value for assets when selling outside bankruptcy, reducing personal liability tied to business debt.
Potential Legal Risks
Bankruptcy could lead to litigation, allowing creditors to dispute corporate processes and potentially access personal assets.
Chapter 7 for Sole Proprietors and Service Providers
Sole proprietors offering services can benefit most by eliminating personal and business debts in one case. With exemptions, proprietors often maintain necessary assets and continue operating.
Considerations for Chapter 13 Bankruptcy
Chapter 13 aims to help individuals retain businesses through a repayment plan spanning three to five years and includes personal and business debts for sole proprietors.
Chapter 11 Bankruptcy for Larger Businesses
Partnerships, corporations, and LLCs usually file Chapter 11 to reorganize debt and maintain operations. Chapter 11, Subchapter V, provides a streamlined option for smaller businesses.
Before Deciding on Bankruptcy
Reflect on your business’s financial status, assets versus liabilities, personal responsibility for debt, and operational viability when choosing to file for bankruptcy.
Involuntary Bankruptcy
At times, creditors may force a business into bankruptcy to recover debt. Involuntary bankruptcy proceeds similarly to voluntary cases but involves the creditors filing on behalf of the debtor.
Bankruptcy Attorneys in McKinney & Plano
At The Law Offices Of Veronica Deaver, our compassionate attorneys are dedicated to helping you navigate difficult financial times, ensuring your best interests are always our priority. We provide personalized care and support as you move towards a better future.
