Get the bankruptcy information you need
If you are overwhelmed by debt that you cannot pay off, declaring bankruptcy is a way for you to get a fresh start. While personal finance experts stress that you should avoid bankruptcy at all costs, going into personal bankruptcy is a last-ditch solution when you've exhausted all other avenues.
Business bankruptcy is also available to companies that are collapsing under the weight of unpaid debts and creditors. Declaring business bankruptcy will affect the cessation of the company's commercial activities, and in most cases, it will also trigger a sale of any assets the business holds in an attempt to address creditor claims.
An Overview of Personal Bankruptcy Law
Personal bankruptcy is sometimes called "Chapter 13 bankruptcy," since the laws that govern the procedure are contained in Chapters 7 and 13 of the United States Code. In essence, when you declare bankruptcy, you are absolving yourself of outstanding debts to creditors. After bankruptcy is declared, all debts will be wiped from your credit report. Your bankruptcy declaration will remain on your record for up to 10 years.
You will, however, have to do all you can to meet your outstanding debts to the greatest possible degree. Certain assets will be liquidated and used to pay off creditors, though some assets are exempt. The assets you'll be permitted to keep vary from state to state, and some states let you opt for federal exemptions rather than state exemptions. Before you make any decisions, it's imperative that you review state-specific bankruptcy information for details.
The Broad Strokes of Business Bankruptcy
Business bankruptcy is declared under Chapter 11 and/or Chapter 7 laws. The principles of personal and business bankruptcy are identical — the business is broke and cannot pay its creditors, so it dissolves and eligible assets are used to pay down debts. However, the business bankruptcy process is far more complex, involving highly technical laws, statutes, exemptions and exceptions that you'll need the help of a lawyer to navigate. Attorneys that specialize in bankruptcy law are available to help you.
In either case, you should always do whatever you can to avoid bankruptcy in the first place. Declaring personal bankruptcy will affect your ability to get credit for a long time to come, and business bankruptcy will make it extremely difficult for you to start another company. Don't use bankruptcy as a means of escaping debts you don't want to pay; instead, only use it as an absolute last resort to avoid complete financial ruin.