According to the Office of Advocacy in the U.S. Small Business administration (SBA), approximately 2.6% of small businesses have filed for bankruptcy in the past seven years. American Bankruptcy Institute data supports these findings and states that more than 323,000 businesses filed for bankruptcy from 2004 through 2010, and more than 39,000 of them were in California. This state’s share of all U.S. business bankruptcies has increased from 12.4% in 2007 to 15.7% in 2010, an indication that the recession hit California businesses harder than other businesses nationwide.
Small businesses can file for bankruptcy protection under Chapter 7 Bankruptcy, Chapter 11 Bankruptcy or Chapter 13 Bankruptcy. According to an SBA study, about 70% of businesses that file under any of these sections either emerge as a reorganized business or liquidate and start a new business, thus enabling small businesses to contribute again to the U.S. economy and job market.
Chapter 7 Bankruptcy, commonly called a “liquidation bankruptcy”, is the simplest and quickest form of bankruptcy. It is available to individuals, married couples, corporations, and partnerships. A court-appointed trustee gathers and sells the debtor’s non-exempt property, and uses the proceeds from the sale to pay the creditors. Most Chapter 7 Bankruptcy cases are “no-asset” cases and the debtor will not have any non-exempt property for the trustee to sell.
Chapter 13 Bankruptcy, known as the wage earner’s plan, is the second bankruptcy available to individuals or businesses. It enables individuals or a business with regular income to develop a plan to repay all or part of their debts. Under this chapter, debtors propose a repayment plan to make installment payments to creditors over three to five years.
If the debtor’s current monthly income is less than the applicable state median, the plan will be for three years, unless the court approves a longer period “for cause.” If the debtor’s current monthly income is greater than the applicable state median, the plan generally must be for five years. In no case may a plan provide for payments over a period longer than five years. During the plan, creditors may not start or continue collection proceedings.
Chapter 11 Bankruptcy, used primarily for business bankruptcies, is very similar to a Chapter 13 Bankruptcy but the trustee can run the daily business operations of the business. In Chapter 11 Bankruptcy, unless a separate trustee is appointed for cause, the debtor, as debtor in possession, acts as trustee of the business.
If you have business that is in financial trouble, you may need to consider bankruptcy protection. Bankruptcy laws can be complicated, and you might need a bankruptcy lawyer to analyze your financial situation.
If you need relief from the stress of debt and you live in or around the metropolitan areas of Riverside or San Bernardino, California, contact us at www.betterbankruptcy.com .We will help you find a bankruptcy attorney in your area who will answer your bankruptcy questions.
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