Small Business Bankruptcy
In Arizona, declaring bankruptcy might help a small business that is experiencing significant financial problems. A small business could consider filing for bankruptcy in one of several ways, and each one has advantages and disadvantages.
- Understand Bankruptcy Options
- Chapter 7: Chapter 7 bankruptcy, also referred to as liquidation bankruptcy, is for companies that don’t see a successful future. At the end of the bankruptcy procedure, the business is dissolved after the business’s assets are then sold off to satisfy creditors.
- Chapter 11: Larger companies opt for this, but small businesses may still qualify. It restructures business affairs, debts, and assets.
- Chapter 13: Chapter 13 lets the business owner repay their financial obligations over three to five years. Sole proprietors are required to have regular income to qualify.
- Consult a Bankruptcy Lawyer
- File the Bankruptcy Petition
- Automatic Stay
- Trustee Appointment and Role
- Meeting of Creditors
- Reorganization or Liquidation
Chapter 7 Bankruptcy
Filing for Chapter 7 bankruptcy in Arizona involves following federal bankruptcy law along with specific Arizona regulations. Here’s the key points about Chapter 7 bankruptcy under Arizona law:
- Credit Counseling
- Means Test
- Arizona Bankruptcy Exemptions
- Homestead Exemption: You can exempt up to $150,000 of equity in your home.
- Motor Vehicle Exemption: You can exempt up to $6,000 in equity in one car, or $12,000 if you’re physically disabled.
- Personal Property Exemptions: Arizona has a list of personal property exemptions, including household goods, furnishings, and personal items.
- Filing the Bankruptcy Petition
- Meeting of Creditors
- Discharge
The trustee sells the business assets under Chapter 7 and uses the proceeds to pay off the business’s debts. As a result, the business is discharged from the bankruptcy. Remember that bankruptcy is a last option and is not ideal for everyone.
The complexity and specifics of bankruptcy depend on the circumstances of the individual. Thus, it’s best to hire an experienced bankruptcy attorney in Arizona who can guide you through the process.
Chapter 13 Bankruptcy
Chapter 13 bankruptcy allows individuals with regular income to develop a repayment plan to repay all or part of their debts over the course of three to five years. The process starts with the filing of a petition with the bankruptcy court in your area. Along with a statement of financial affairs, you have to submit papers listing your assets, liabilities, income, and expenses. Complete a credit counseling course from a government-approved agency before filing.
The repayment plan must be submitted at the time of filing or within 14 days after the petition is filed. It must specify how you intend to manage your debts over the following three to five years. When you file for Chapter 13 bankruptcy, an automatic stay takes effect, preventing most creditors from collecting debts.
In every Chapter 13 case, a trustee is appointed. The trustee’s responsibilities include examining your case, scheduling payments, and presiding over the creditors’ meeting, also known as the 341 meeting. Following the hearing of creditors, the bankruptcy court will either confirm or reject your repayment plan, recommending modification or conversion to a Chapter 7 case.
Once your repayment plan has been approved, you can start making payments to the trustee. The trustee then distributes these payments to your creditors in compliance with the plan’s terms. The court will dismiss the outstanding balance of qualified debts once you have completed all payments under your repayment plan. It is critical to understand that not all debts can be canceled. Certain taxes, alimony, child support, and school debts, for example, are often not dischargeable.
Chapter 13 bankruptcy is a complicated process in which minor errors can have serious implications. Hire a bankruptcy attorney who can walk you through the process, explain the laws to you, and advocate on your behalf.
