Everything You Need To Know About Bankruptcy

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Everything You Need To Know About Bankruptcy
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• Bankruptcy is a business owners worst nightmare.
  Whenever you file for it, youre admitting that
  you cannot repay the debts that you owe. However,
  do you really know what goes on when you file for
  bankruptcy? If youre curious about finding out,
  then keep reading!

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What Exactly Is Bankruptcy?

• Bankruptcy is a status that many of us would
  rather not have as its considered a badge of
  shame for many. Why is this the case?, you
  might be wondering. This is because the eyes of
  the big three credit companies, Equifax,
  Experian, and Transunion are always watching for
  people who dont repay their debts. They compile
  the reports of many loaning organizations to
  create the credit profile of an individual.
• If someone fails to pay a debt, they will end up
  getting a mark or report on their credit reports
  which reflects on their credit score. Your credit
  score is a numerical value that many companies
  will use to gauge whether they will lend you
  money, let you buy a new home, and many more. It
  can even dictate the terms of your loan. However,
  these non-payment marks are minuscule compared to
  bankruptcy on your credit report.
• Bankruptcy is a massive red flag on your credit
  reports that will stay there for over seven years
  if you ever file for it. Your credit score will
  take a nosedive and youre going to have a
  difficult time recovering from it. This is why
  bankruptcy tends to be a final resort for many
  individuals or business owners who can no longer
  pay the debts that they owe. If you file for it,
  your credit score is going to end up suffering
  and it will keep you from getting any new loans,
  new credit cards, and even mortgaging a new home.

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The Different Types of Bankruptcy You Can File

• Bankruptcy filing can come in several shapes and
  forms, with some being better than others. Some
  organizations will also benefit more from
  different kinds of filings. The main types of
  bankruptcy filings youll be facing are the
  following

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Chapter 7
This type of bankruptcy is mainly used by
individuals. The main idea behind this specific
chapter of bankruptcy is to liquidate and sell
assets so that they can repay their debts.
Usually, the target for liquidation are
non-exempt assets that usually include leisure
and excess assets. Item collections and extra
vehicles come to mind here.
Chapter 11
Chapter 11 is mainly used by businesses. Its
primary purpose is to reorganize a failing
business in order for it to start generating
profits again. This can come in the form of
various new promotions, advertising, new services
or anything of the like to start creating profits
once again.
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Chapter 13

• The target of this chapter are people who have
  too much income to qualify for chapter 7
  bankruptcy. This is less of a type of bankruptcy,
  but rather a wage earners plan that lets an
  individual pay their debt over an extended period
  of time.
• These different types of bankruptcy benefit each
  type of entity or individual differently.  For
  example, PDQ Staffing is owed several hundred
  dollars by RDT company for hiring one of their
  candidates but they file for bankruptcy. RDT is
  going to file a chapter 11 because theyre a
  business, and not an individual and this lets
  them recover and eventually repay their debt to
  PDQ. However, if RDT is owned by a single
  individual, they can file for either a Chapter 7
  or 13 depending on their income and they can sell
  their business off to pay off their debt.

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The Silver Lining of Bankruptcy

• It doesnt have to be all bad though. Bankruptcy
  might be a badge of shame, but it at least has
  its use. It lets individuals who are too far gone
  into debt a second chance in life. Bankruptcy
  resets most, if not all, your debts back down to
  zero so you can make better decisions.