Bankruptcy and business debts
On behalf of Bankruptcy Law Firm of Clare Casas on Wednesday, April 8, 2015.
Many Florida residents start a business while keeping their jobs to generate additional income, but sometimes the new venture does not provide the desired financial boost. Credit cards are often used as a way to make ends meet, but this may lead to more debt and higher monthly obligations. While increasing income or reducing expenses may be the preferred methods of improving a difficult financial situation, these are rarely realistic options for those with unmanageable debt. For most people in these situations, intervention through bankruptcy may represent the most prudent course of action.
Individuals with an unmanageable financial situation may file a Chapter 13 or a Chapter 7 bankruptcy. A Chapter 7 bankruptcy filing is the most popular option, and it will usually discharge debt in about 90 days. A Chapter 13 bankruptcy involves debt being consolidated into a payment plan that could last three to five years. The remaining debt is then forgiven.
One benefit of filing a bankruptcy is that the forgiven debt is not considered income by the IRS. Consumers who are not insolvent could be required to pay tax on debt that is forgiven or written off by creditors as part of a debt relief agreement. Many people are hesitant to file a bankruptcy because of fears that they will be unable to rebuild their credit, but reestablishing credit after a bankruptcy is often fairly straightforward.
An experienced bankruptcy attorney could assess the debt relief options available to those with business debts, and the preferred course of action may be determined by whether the debt is owed by the business or an individual. Even businesses with a household name may seek bankruptcy protection to provide the time necessary to reorganize, and an attorney could explain how a Chapter 7 or Chapter 13 bankruptcy could end creditor harassment and provide the possibility of a financial fresh start.