Business and Individual Bankruptcies - Theodore N. Stapleton, P.C.
Navigating the intricacies of bankruptcy, whether as a business or an individual, can be daunting. At Theodore N. Stapleton, P.C., we have the expertise and dedication to guide you through every step. Let's explore the distinct types of bankruptcies and what each entails.
Chapter 11
Business Reorganization
Overview
Typically used by corporations, partnerships, and some individuals, Chapter 11 allows entities to retain control of their operations (in most cases) but under the oversight and jurisdiction of the court.
Qualifications
No specific debt limit, making it available to larger entities.
Timeline
Generally lengthier, ranging from several months to a few years.
Key Points
Allows for restructuring and resizing, offering a chance to return to profitability.
Subchapter V
Streamlined Business Bankruptcy
Overview
A newer bankruptcy option specifically designed for small businesses, providing an expedited and less expensive route compared to traditional Chapter 11.
Qualifications
Total debts must be below a specified threshold, and at least half must arise from business activities.
Timeline
A plan needs to be proposed within 90 days of filing.
Key Points
Fewer reporting requirements and eliminates the need for a creditors' committee in most cases.
Chapter 7
Liquidation
Overview
Applicable to both individuals and businesses, assets are sold to repay creditors.
Qualifications
Subject to a means test for individuals. Businesses should consider it if there's no viable future.
Timeline
Generally quicker, from a few months to a year.
Key Points
For individuals, certain debts like student loans and tax liabilities may remain. Businesses cease operations post-filing.
Chapter 13
Individual Debt Adjustment
Overview
Solely for individuals, including sole proprietors. Enables debtors to retain their assets and pay creditors through a repayment plan.
Qualifications
Debt limits apply; secured and unsecured debts must not exceed specific amounts.
Timeline
Repayment plans last between 3 to 5 years.
Key Points
Debtors can stop foreclosures or repossessions, and they can reschedule secured debts.
Potential Issues & Considerations
Automatic Stay
Once filed, most collection actions against the debtor are halted. This provides temporary relief from any foreclosures, evictions, or garnishments.
Exemptions
Under Chapter 7, some assets can be protected or "exempt" from liquidation. Understanding federal and state-specific exemptions is key.
Feasibility
Especially under Chapter 11 or 13, the court will examine the feasibility of repayment plans to ensure creditors receive due payment.
Operational Challenges
For businesses, restructuring under Chapter 11 can come with operational challenges. Leadership and strategy may need to evolve.
Choosing the right path in bankruptcy is critical, and the nuances between each type can be profound. At Theodore N. Stapleton, P.C., we stand ready to assess, advise, and advocate on your behalf, ensuring the most beneficial outcome for your financial future, whether you're a business entity or an individual.
Note: This content is for informational purposes only and does not constitute legal advice. Always consult with an attorney for any legal decisions.