Individuals who run small businesses have more financial stressors than the average adult. Not only do they need to maintain their home and personal finances, but they must also attend to business resources and financial obligations.
When a business begins to struggle, entrepreneurs and business owners may face difficult decisions. Sometimes, bankruptcy is the best option. A Chapter 7 bankruptcy can help someone avoid aggressive collection activity or limit personal financial liability for business debts when they close a company. It can also take financial pressure off of a struggling business by discharging certain debts so that income can go toward crucial expenses that impact company operations.
Unsecured debts are eligible for discharge
The average Chapter 7 bankruptcy can lead to a discharge of certain unsecured debts. Financial obligations without any collateral property are unsecured debts that may be eligible for discharge. Credit card balances, personal loans, payday loans and medical debts are among the financial obligations that people can discharge with a timely Chapter 7 filing.
Not all unsecured debts are eligible for discharge. Certain types of debts remain valid and collectible even after a successful bankruptcy filing. Tax debts are a perfect example. With rare exceptions, funds owed to local authorities for property taxes and income taxes owed to federal and state authorities are not eligible for a discharge in a bankruptcy filing.
Past-due financial obligations related to court orders, including child support balances, are also typically ineligible for discharge. Certain debts, like student loans, are typically not eligible for discharge but can be dischargeable in very specific circumstances.
Many business debts and personal debts could be eligible for a discharge during a Chapter 7 filing if people follow the proper process. The more debts a business owner reports when filing for Chapter 7 bankruptcy, the more financial obligations they can potentially eliminate.
A successful Chapter 7 filing can lead to a major reduction in the regular debt-related expenses for an individual or business. Learning about how Chapter 7 bankruptcy can help those struggling with certain debts may benefit people who want to preserve their resources and regain their financial solvency.