Business ventures do not always go as planned. Sometimes what seemed to be a good idea on the drawing board does not pan out as financially well as was hoped. In a best-case scenario, losses can be recouped and the plans can be revised in such a way that you can carry on down another, more successful path. However, sometimes, the best of contingency plans fall through, or the disaster leaves you reeling, unable to climb out of the abyss of debt. In such cases, bankruptcy is the best, albeit difficult, option.
Although bankruptcy can seem devastating and complicated, it does not have to be the disaster that one might think it is. Bankruptcy does not necessarily mean that a person loses every single dollar or item of value to his name. Depending on the type of bankruptcy, a business may be permitted to keep its doors open and continue to function at a diminished capacity.
In ancient times, a person who could not pay his debts was thrown into a debtors’ prison until he or she could produce the necessary funds. There was no such thing as an official credit rating, so there was no way of ensuring that a lender would be paid unless the offender was physically imprisoned. However, eventually people realized the rather obvious fact that generating income sufficient to repay debts is particularly difficult when imprisoned. Modern law uses a system of codes and ratings to protect lenders while making debtors’ obligations far less devastating.
Modern American law allows for several types of bankruptcy. The type of bankruptcy most non-legal professionals use when referring to the term is Chapter 7. Chapter 7 bankruptcy involves liquidation of virtually all assets. The proceeds from the sale of assets go to offset the losses incurred by the lender, who will now not receive the full value of what they are owed. These assets do not include those exempt by federal or state regulations. Because Chapter 7 bankruptcy allows for some absolution of debt, it can be repeated only once every six years at most.
Another common type of bankruptcy is Chapter 11. This type is specifically for businesses. Instead of liquidating the debtor’s assets and forgiving debt, this version involves formulating a debt repayment plan. Because Chapter 11 of bankruptcy involves calculated repayment versus forgiveness of debt, it does not carry the same time restrictions as Chapter 7. It is often used by businesses that wish to continue to operate in order to have the means to pay back debt.
The Southwest, and Phoenix, Arizona in particular, is unfortunately a place where these topics become relevant. This is because the Phoenix job market was hit somewhat harder than the national average. Therefore a good Phoenix bankruptcy attorney can be a valuable asset. A Phoenix bankruptcy lawyer will work with the client to determine the best form of bankruptcy to file and will ensure that the process is a painless as possible.
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