Los Angeles Bankruptcy Basics
In order to understand the basics of bankruptcy, you should understand first that there are several types of bankruptcy, and each works a bit differently than the others. There are two main categories of bankruptcy - personal and business. Personal bankruptcy covers Chapter 7 and Chapter 13 bankruptcy, while business bankruptcy covers Chapter 7 for businesses and Chapter 11 bankruptcy. Additionally, for family farms and fisheries, there is Chapter 12 bankruptcy, and lastly, for municipalities, there is Chapter 9 bankruptcy. Depending on your situation, you may need to file one or more types of bankruptcy in order to fully cover your business and personal liabilities.
Personal Bankruptcy - Los Angeles County Bankruptcy
There are two types of personal bankruptcy: Chapter 7 and Chapter 13. Chapter 7 bankruptcy is liquidation bankruptcy - this means that all of your non-exempt property will be sold (liquidated) in order to satisfy the debts that you owe to creditors. However, in many Chapter 7 bankruptcies, there are few non-exempt assets. In some cases, there may be no non-exempt assets at all, and in those cases, the person filing for bankruptcy keeps all of his or her possessions, while the eligible debts are fully discharged.
Chapter 13 bankruptcy, on the other hand, is better suited for individuals who may have property that they want to protect that is not covered by an exemption. Additionally, in order to file Chapter 13 bankruptcy, you must have a steady source of employment/income. Chapter 13 bankruptcy reorganizes debt, and has many benefits for those who may be able to pay some of their debts, but not all. In addition to being able to keep your property, there are a greater number of options for reducing debts which cannot be discharged in a Chapter 7 bankruptcy.
Business Bankruptcy - Los Angeles County Bankruptcy
For business bankruptcy, Chapter 7 works in much the same way as a personal Chapter 7 - property is sold in order to satisfy the creditor's claims according to the priorities for debt set forth by law. Priority debts are paid out first, followed by secured debts, and then unsecured debts. In some instances, creditors may attempt to go after the personal assets of the business owner(s) as well, which can lead to the need to file for personal bankruptcy protection in addition to the initial business bankruptcy filing.
For Chapter 11 bankruptcy, the business is allowed to reorganize debt, alter contracts, and take substantial steps to reduce debt while still maintaining a repayment schedule that satisfies those creditors who hold the majority of the debt that the business owes. The business does not have to close, and in many instances, a company which has successfully completed Chapter 11 bankruptcy emerges stronger and more viable as a result.
These descriptions only cover the basics of the bankruptcy process. This site offers more in depth information if you want to understand the details of a particular bankruptcy process. We also offer a free initial case evaluation to help you understand bankruptcy, the protections it can provide, and what you can do to retain your assets while minimizing your debts. Please contact us today and schedule your free initial case evaluation as soon as possible. Let one of our reputable, professional Los Angeles County Bankruptcy Attorneys answer your questions one-on-one and give you the advice you need to proceed with your bankruptcy case.