Patrick O'Malley

Bankruptcy 101

*** Today, in the era of COVID-19, we can take comfort knowing that bankruptcy is specifically designed as a ‘shock-absorber’ that promotes the recovery of the individual, the business, and society. ***

Bankruptcy is a legal process administered by the U.S. Federal Courts.

Bankruptcy law overview

The U.S. Bankruptcy Code quickly, transparently, and fairly to all parties, discharges debts and contract obligations. This allows all parties to get back to their regular lives and businesses. This benefits them, as well as benefiting society at large. The code weighs the interests of many constituencies: debtors, creditors, the courts, civil society, social harmony and the economy. In every bankruptcy losses are suffered; the code assures these losses are dealt with according to clear and fair rules that all parties are held responsible to know beforehand.

Who can use bankruptcy, when, and how

The filer, whether an individual or a company, benefits from bankruptcy when their financial obligations become unmanageable and there is no realistic hope of recovery without bankruptcy protection. Three hundred pages of bankruptcy law cover every type of party and every type of scenario.

Just three “Chapters” of the bankruptcy code successfully cover 99% of filers, whether for individuals with literally nothing in their pocket or the world’s largest companies with hundreds of billions of dollars in assets.

Chapter 7 is a ‘liquidation’ process. The filer hands over all their assets, except those assets that they are legally allowed to keep. The assets handed-over are sold. Whatever money results is used to pay creditors in an orderly and proportional fashion. This process typically takes less than six months, and the filer is now fully discharged of their debts.

Chapter 11 and Chapter 13 both involve a more complex ‘reorganization’ process. The filer, within the rules set out in the code, and working with the court representative, creates a repayment plan to pay at least some portion of the debts, and satisfy and/or modify, their contract obligations. The repayment plan period typically lasts for three to five years, but can be longer. Once the plan has been satisfied, the filer is now normally fully discharged of all debts and obligations.

Contact us for help

Business Bankruptcy Solutions helps you lower the debts, renegotiate contracts and save your money and businesses. Call (720) 674-7311 or email now to schedule a free consultation. We will discuss the problems facing both your business and personal finances and the tools we can use to achieve your goals. We draw upon decades of legal and business experience to provide you with actionable solutions. With BBS on board, we’ll help you weather this storm.