Bankruptcy exists to help individuals and businesses get out of a difficult to impossible financial situation. At May, Potenza, Baran, and Gillespie, we sometimes receive phone calls from Phoenix area businesses and individuals wondering if filing for bankruptcy is the right decision for them. Of course, that is not a question that is easily answered. Here are some considerations that may be helpful to determine whether bankruptcy makes sense.
Who Should File?
If times are tough, you may think bankruptcy is the only solution. In many instances, there may be other alternatives you are unfamiliar with. Our Phoenix lawyers at May, Potenza, Baran, and Gillespie can discuss all your options with you, so you understand where bankruptcy falls on the scale.
One common misconception is that all debts are forgiven in bankruptcy. If you have student loan debt, child support obligations, alimony, or recent tax debt, you will still be liable for these debts under bankruptcy.
Bankruptcy can eliminate certain debts including credit card debt, medical debt, or repossession/foreclosure debt. If you are being harassed by creditors, or have a lien put on you home, bankruptcy can help you regain peace of mind.
Which Type of Bankruptcy is Right?
There are three general types of bankruptcy: Chapter 7, chapter 11, and chapter 13. Your income levels and outstanding debt levels affect the type of bankruptcy you can file.
Chapter 7 allows you to discharge eligible debts; however, under Chapter 7 you may be required to sell off certain assets (like your car and home in some cases) to satisfy debts.
When filing for Chapter 13, you must develop a repayment plan to pay back debts but can keep your assets. As long as you repay debt according to the plan, the bankruptcy will be discharged.
Chapter 11 is for corporations or partnerships, not individuals. Similar to chapter 13, a chapter 11 bankruptcy involves organized debt repayment.
Filing for bankruptcy is serious. Before you do it, it is vital that you speak with a lawyer so you can make an informed decision about whether you should declare bankruptcy.
Would you like to receive a consultation from our MPBG attorneys tailored to your unique circumstance? Contact us at (602) 252-1900 to arrange a meeting with one of our business attorneys.
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