You can file for bankruptcy protection under the bankruptcy laws, if you are finding it difficult to repay your creditors. Bankruptcy protection involves having most of your debt canceled with the inclusion of selling off some of your assets. The other option could be to have an organized plan to pay off the debts. If you are in business, a bankruptcy protection can be a source of debt relief from debts and contracts, should the business continue operating. You could also choose to sell the business' assets and use the money to pay off debtors.
There are two forms of bankruptcy regularly used by individuals. There is Chapter 7 and Chapter 13. A chapter, in this case, refers to the chapter of the bankruptcy code that explains each one of them. Another reference of Chapter 7 would be liquidation or straight bankruptcy where your assets are controlled by an appointed trustee. The trustee has the authority to sell off your assets and use the money to pay off creditors. However, different states have different laws and in some states, you are allowed to keep some personal property.
On the other side, the Chapter 13 which is also known as the "wage earner bankruptcy" permits you to request for a repayment plan without interest over a period of between three to five years. Your plan has to be approved by the court and you are protected from the creditors. They cannot seize your assets and sell them off to pay back what is owed to them. Your creditors are also required to abide by the provisions of the repayment agreement.
Businesses have the option of seeking bankruptcy protection under chapter 7 and chapter 11. Chapter 11 involves restructuring of assets. Just like chapter 13, the chapter 11 option proposes a repayment plan, within a specified time period. The creditors are thereafter expected to create a plan. The nature of bankruptcy laws can be complex, so it is always advisable to retain counsel.
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