When your business is collapsing due to overwhelming debts, you might need to file a bankruptcy. However, there are many types of bankruptcy, which are categorized by U.S. Bankruptcy Code as several chapters. Basically, Chapter 7, Chapter 11 are 2 most common types. The fee for filing varies, decided by the type of bankruptcy, the complexity of the case, among others.
Chapter 7: The Liquidation of Assets
This is designed for individuals and businesses with few or no assets. Chapter 7 bankruptcy allows you to dispose of your medical bills, credit card balances and other unsecured debts (in which credit was given not backed by any underlying assets). You can sell the nonexempt assets to repay unsecured debts. Nonexempt assets include cash, stocks, or bonds, high-value collections (coin or stamp collections), second homes. However, if you have no valuable assets and only exempt property, such as personal clothing, household goods, tools for your trade, personal vehicles worth a certain value, you might repay no unsecured bills.
Chapter 11: Company and Individual Reorganization
For the most part, it is businesses that usually file chapter 11. These businesses hope to reorganize, keep operating, and earn profits once again. That said, companies are allowed file chapter 11, though some individuals can also file chapter 11 bankruptcy in rare cases.
Basically, chapter 11 bankruptcy enables the businesses to remain in business while repaying their debts under the federal court’s supervision. Chapter 11 can help the companies make plans for profitability, reduce expenses, and generate profits.