The best business owners are those who not only strive for success but have knowledge about their available resources in the event of financial setbacks. If your business gets into a bad financial situation and becomes insolvent, it may be time for a contingency plan where the business needs to erase its debt. The prospect of filing for Chapter 7, Chapter 11 or Chapter 13 Bankruptcy can be very intimidating.
However, if it is the right decision for your financial situation, then it’s a responsible one that has been part of the American legal system for a long time. The legal side of declaring bankruptcy is intricate and seeking a bankruptcy lawyer can make the process much easier to navigate. However, it behooves one to become familiar with the background and basics of the process before engaging an attorney. You will find below, a basic guide surrounding filing for Chapter 7 and 13 Bankruptcy. For Chapter 11, the process is more intricate and should be discussed with an attorney. However, for Chapters 7 and 13, use this and other resources to determine what the best course of action is for your business.
Why File Bankruptcy?
You should because you deserve a fresh start. Edison tried over 700 ways to make a light bulb before he got it right. When asked by a New York Times reporter about the concept of failure, Edison answered,
“I have not failed 700 times. I have not failed once. I have succeeded in proving that those 700 ways will not work. When I have eliminated the ways that will not work, I will find the way that will work.”
Do not feel discouraged in the process of filing for bankruptcy. This process is just another tool in the process of finding the right path for your business.
Many people have been in this position before, many more still will be, and many of those businesses who sought help from bankruptcy are now back on their feet and profitable. U.S. law allows you to eliminate or reduce your debt if you or your business is in the red and qualifies for bankruptcy.
Should You File?
First, determine if you should file for bankruptcy and what specific chapter you will file for. The two common types of bankruptcy forms for individuals and small businesses are Chapter 7 and Chapter 13. If you are sure you will file in Las Vegas and you would like specific advice on your case, contact The Law Offices of Tony M. May, P.C. online or by phone.
In October of 2005, a new bankruptcy law took effect. This law acts to establish a determination for the type of bankruptcy filing an individual may qualify for through a mathematical formula called a “means test.” This will take into consideration, your monthly income, the size and type of debt you have, and your financial assets.
In the city of Las Vegas, an individual may file for Chapter 7 or 13 Bankruptcy if their annual income amounts to less than the state median income in the state of Nevada. If an individual's annual income amounts to over the state median income, they will be required to complete a list of pre-qualifications, including an estimate deduction on their projected disposable income for the next 5 years. This, among other qualifications, will determine which chapter you may file for.
Chapter 7 Bankruptcy
This is often filed by individuals who find themselves in personal debt with unsecured debtors. You may file for Chapter 7 Bankruptcy for a maximum amount of debt management and for protecting your assets. Chapter 7 works to wipe out unsecured debts, like hospital bills, utility delinquencies, and credit cards. The process of being approved for Chapter 7 Bankruptcy is relatively streamlined and speedy for the one filing.
Normally in Las Vegas, the time elapsed between filing and being approved is between three to five months. However, this should be used with caution. The law only permits one to file for Chapter 7 once every seven years, so it is useful to consult a bankruptcy lawyer in determining whether or not filing bankruptcy at this time is right for you.
If approved, Chapter 7 Bankruptcy allows one to eradicate the majority of their unsecured debts but requires an individual to give up all of their non-exempt property. Often, those who file for Chapter 7 Bankruptcy no longer have any non-exempt property or equity or they had secured their assets. One may secure assets prior to filing, by pledging them to a secured creditor as debt collateral. Assets protected under exemption laws are not available to pay off unsecured creditors and are known as “no asset” bankruptcies. Often, Chapter 7 Bankruptcies are classified as no asset files. A court can deny a Chapter 7 Bankruptcy case if the individual's debts are mostly consumer-based.
Chapter 13 Bankruptcy
Often, filed by small businesses and sole proprietorships, Chapter 13 of the bankruptcy code allows debt to be paid back as part of a repayment plan at a smaller portion of the original amount. Though one must still pay their debt in part, they are not required to give up property. After being approved, recipients will live within a strict budget, which is monitored by the bank and the court trustee. The process for Chapter 13 Bankruptcy approval takes a significantly longer duration of time than that of Chapter 7.
Once approved, failure to meet the required monthly payments will result in a restitution of one's debts and a failure of the bankruptcy. However, debtors have an opportunity at that time to convert their bankruptcy to a Chapter 7.
Unlike Chapter 7 Bankruptcy, Chapter 13 Bankruptcy is implemented by those who are behind with payments such as a repayment plan or a mortgage. Chapter 13 allows those who are approved to catch up on their debt over time. A great benefit in filing for Chapter 13 is the opportunity for debtors to keep their homes free from foreclosure.
- Chapter 11 Bankruptcy
For large businesses or businesses with significant assets, chapter 11 is more likely the right choice of bankruptcy if the business wants to eliminate debt and continue the business. Since this is the most complicated of the three types of bankruptcy, we recommend that you sit down with a bankruptcy attorney and discuss your options directly. Many large companies in the United States, as well as within the Las Vegas Valley, have used bankruptcy as a means of keeping a business going, despite suffocating debt.
If you would like to have a confidential discussion with an attorney to determine if bankruptcy is right for you, and which form of bankruptcy will best suit you or your business, please contact us at The Law Offices of Tony M. May, P.C.
How Much Will it Cost?
Like anything in the legal industry, filing for bankruptcy can be a complicated and costly endeavor. There is more to filing for bankruptcy than a simple form and a fee. Individuals will encounter several fees mandatory for the processing of one's file. Fees will be required for pre-filing, credit counseling, debt management ‘education’, legal consultation, preparing and processing of the required forms, and other varied court procedures. It’s difficult to say, for certain, since every case is different but the process will likely cost an individual anywhere between $415 and $2500.
Many applicants may qualify for fee waivers. Finally, the cost of the filing process will be contingent on one's individual financial standing. This may take into consideration foreclosures, child support related debt, back taxes, and the status of asset exemptions. For professional help in navigating the world of bankruptcy law in Las Vegas, contact The Law Offices of Tony M. May, P.C.