Those who are struggling to meet their financial obligations are not alone. The pandemic has left many businesses struggling. This has caused both business owners and individuals who depend on jobs from these businesses scrambling, trying to keep their finances in order in an economy that is now trying to build itself back up after weathering the pandemic.
In some cases, an important step towards building back up is starting over. Bankruptcy can be that first step. Those who are considering bankruptcy have likely heard of chapter 7 and chapter 11 petitions for relief. This piece will discuss the basics of these two common options.
What are some similarities between a chapter 7 and chapter 11 bankruptcy?
Regardless of the chapter, those who wish to move forward with bankruptcy relief must file a petition. There are strict requirements and an applicant must include all necessary documents and properly complete the required paperwork in order to move forward with the process.
Those who file a successful petition for relief through bankruptcy receive the protections of bankruptcy. One of the biggest protections is the automatic stay. This is a court order that essentially stops collection efforts.
What is different?
A chapter 7 bankruptcy results in the discharge, or essentially the forgiveness, of certain debts. The process begins with a review of assets. The law provides that some assets are exempt, while the court will use others to pay off creditors. It is important to note that property like the family home and vehicle are often exempt from this process. Individuals often use this option.
In contrast, those who go through a chapter 11 bankruptcy will put together a more manageable repayment plan. This is often used by businesses looking to protect their interests.