In order to get the fresh start that bankruptcy can offer, you’ve got to consider which type would be best for you.
Chapter 7 bankruptcy is often known as “liquidation” or straight bankruptcy because it requires clearing out all nonexempt property to satisfy debts owed to creditors. If they meet certain requirements, Texas consumers can use this type of personal bankruptcy to obtain the debt relief needed to start fresh.
Alternatively, a consumer may choose to seek a Chapter 13 bankruptcy. This type of bankruptcy requires a plan to repay at least a portion of the debt over a designated period of time.
But Chapter 7 and Chapter 13 bankruptcy do not only apply to individuals. Chapter 7 or Chapter 13 can also apply to small businesses owners, if their businesses are set up as sole proprietorships.
In a Chapter 7 small business bankruptcy, the bankruptcy trustee will be responsible for selling assets to apply toward debts. Debts that cannot be satisfied with the available assets will be discharged. In Chapter 13, by contrast, the trustee will set up a payment plan lasting from three to five years.
Recently, a Texas retailer filed for Chapter 7 bankruptcy protection. Austin Plumbing Supply closed its doors suddenly and without notice and moved quickly into bankruptcy proceedings.
The store shut down in early June 2012. The Chapter 7 filing says the company has assets between 100,000 and $500,000. However, the company has liabilities between $1 and $10 million.
The filing also lists dozens of creditors, including the City of Austin along with several contractors and suppliers. A creditor’s meeting is scheduled for later this month.
Source: Austin Statesman, “Austin Plumbing Supply Files for Bankruptcy,” June 21, 2012