man filing for bankruptcy and looking at finances

What Are the Differences Between Personal and Corporate Bankruptcy?

Sometimes people find themselves over their heads in debt. Financial debt can affect anyone whether you’re a recent college graduate or an experienced professional. For many people, the choice to file for bankruptcy is made so as to provide relief. However, there are many differences between personal and corporate bankruptcy. The applicable rules are dependent upon which one of these bankruptcies is filed. 

The Means Test and Getting Rid of Debt

An individual who applies for personal bankruptcy must submit to a means test in order to demonstrate that they are unable to pay off their debts. However, businesses that file for corporate bankruptcy are not required to submit to such a test. 

While businesses are able to cancel contracts if their creditors agree, individuals who owe money aren’t as fortunate. Those who owe money for child support, student debt, and other specific types of debt can’t get rid of it. 

Chapter 7 Bankruptcy

Chapter 7 bankruptcy is often very appealing to individuals, as this type of bankruptcy gets rid of most debts (e.g., child support, tax-related debt, and student loan debt). However, when a business files for bankruptcy under Chapter 7, it may end up sacrificing the whole business. 

Chapter 13 Bankruptcy

Chapter 13 bankruptcy is also most often used by individuals filing for personal bankruptcy. This is because it allows debtors to restructure their debt in order to allow them to pay it off in smaller amounts over a longer period of time. 

Chapter 11 Bankruptcy

Chapter 11 bankruptcy is most often used by businesses. While it is similar to Chapter 13 bankruptcy in that it also helps to reorganize debt, it differs in that a business must submit a proposal for how they want to pay off their debt (revised terms) while their creditors may also propose new terms. A vote is then taken among all of the creditors for how everyone should move forward. 

When you are at the point where you must decide whether or not to file for bankruptcy, it can be an extremely overwhelming time. However, filing for the right type of bankruptcy can allow you to start over again. A qualified bankruptcy attorney can help you to figure it out. 

Toronjo & Prosser Law Helps Those Who Are Dealing with Bankruptcy 

It’s undoubtedly stressful to realize that you don’t have enough money, and even more stressful when you realize that filing for bankruptcy might be your best option. That’s why it’s so important to consult with a knowledgeable and experienced Dallas bankruptcy attorney. At Toronjo & Prosser, our qualified Texas Bankruptcy Attorneys can help you to navigate the process. To learn more or to schedule a free consultation contact us online or call us today!