If your business interests are making unsupportable losses and you are piling up debt, you may be forced to consider filing for bankruptcy. You may have heard that there are two main types of bankruptcy available in Alaska, as there are in all other states. These are called Chapter 7 and Chapter 13 bankruptcy. They have their own specific advantages and disadvantages. It makes sense to familiarize yourself with the differences between them before you opt for one rather than the other. You will be unable to reverse your decision once the bankruptcy process has started, so if you have any concerns and need advice talk to an experienced business attorney at the Law Office of Dattan Scott Dattan in Anchorage.
An overview of the differences between Chapter 7 and Chapter 13 is given below.
Chapter 7 bankruptcy
If you file successfully for Chapter 7 bankruptcy, on f the major differences with Chapter 13 is that any of your debts are canceled and you will not be forced to make repayments to repay the debt your business owes. Chapter 7 is the preferred choice for most individuals or businesses that wish to end their debt burden if they have no expectation that their business interests will survive and thrive after a bankruptcy has been declared.
Chapter 7 is also the least expensive option as it is less complicated than Chapter 13. A Chapter 7 bankruptcy agreement may only take 3 to 6 months to complete.
There are some disadvantages of choosing Chapter 7. One of them is that if you have a house, a car or other substantial secured asset it may be seized by the creditors or the bankruptcy court unless they have been exempted. This type of bankruptcy is therefore not suitable if you have a valuable home and wish to keep it after the bankruptcy is agreed.
Any assets or income that you do acquire after a Chapter 7 bankruptcy cannot be seized by creditors. Your debt will have been canceled, so eliminating the threat of any future punitive action against you. In effect, you will be given a fresh start after bankruptcy has been agreed.
One other disadvantage of a Chapter 7 bankruptcy is that if you have declared bankruptcy once already, you cannot declare it again within 8 years of the last one.
Chapter 13 bankruptcy
The basic difference between Chapter 13 and Chapter 7 is that with Chapter 13 your debts are not automatically canceled, but a debt repayment plan is scheduled instead. This means that you may be able to retain any non-exempt assets that you own, particularly any property owned that is not covered by any exemptions.
In fact, Chapter 13 may be the only option if you wish to retain your property after declaration of bankruptcy.
There are other advantages of a Chapter 13 bankruptcy. You may not discharge all of your debt like a Chapter 7 bankruptcy but at least you can declare bankruptcy more than once.
Your debts are not cleared until paid. This might mean the full amount or a partial amount depending on negotiations with your creditors. The repayments may be scheduled over a 3 to 5 year period, so within this time, the debt is still not considered repaid and therefore you are technically still bankrupt.
By filing a Chapter 13 bankruptcy it means that any creditors cannot collect debt or any of your income except for what has been agreed to as part of your repayment plan. If repayment of debt has agreed to be full payment, then any co-debtors are not exposed to the efforts of creditors. If creditors happen to violate the FDCPA laws, you may want to contact a collections lawyer who can help guide you through the process.
It is important to make a decision about bankruptcy earlier rather than later. The earlier you choose to file a bankruptcy type the sooner you will be free to get on with life and make a fresh start with the same or another business. To get legal help with bankruptcy, whether you finally opt for Chapter 7 or Chapter 13, talk to an experienced business attorney at the Anchorage Law Office of Dattan Scott Dattan. You can ring our office at (907) 276-8008.