Petitioners filing for bankruptcy have to indicate under which chapter of the bankruptcy law they’re filing. It’s usually under either Chapter 7, Chapter 11, or Chapter 13.
Before considering the differences between the three, let’s take a minute to review the reasons why an individual, a partnership, or a corporation would find itself having to file for bankruptcy. In all cases, it’s usually a situation where cash outflows are larger than cash inflows. No matter how simple or sophisticated the financial dealings of the petitioner, boiled down to the essentials of the case, it’s usually an instance where the petitioner has assumed financial obligations which far outweigh the income available to cover those obligations.
Caught between the proverbial rock and a hard set, most petitioners turn to the Bankruptcy Court (a federal court) as a last resort. The U.S. legal system allows for petitioners to explore relief from the claims of their creditors through bankruptcy. Every entity–individual or business–has the right to do so once every seven years. While some would never even consider filing for bankruptcy, others have regularly found themselves headed for the court over and over again in order to build their financial houses in order.
As mentioned earlier, petitioners have to indicate the type of bankruptcy relief they’re seeking. That’s why bankruptcy Chapter 7, Chapter 11, or Chapter 13 are used to distinguish among filings. Each allows for a clear type of relief for the petitioner.
A Chapter 7 bankruptcy filing indicates the petitioner (usually an individual) is asking for liquidation. Save another away, it means that whatever assets the petitioner possesses will be sold and the proceeds used to pay off creditors (sometimes for pennies on the dollar). It’s well-known to note that in a Chapter 7 filing, individuals are able to keep some of their possessions. Each state has identified certain exemptions which a petitioner can use to hold on to certain possessions. They include, for example, tools used to work in a trade, homes, household furnishings, etc.). Therefore, depending upon the residence where petitioners reside, they’ll be allowed to spare positive of their assets from being sold off.
A Chapter 11 bankruptcy filing usually occurs when a business, especially a corporation, is filing for bankruptcy. Once again, the petitioning business or corporation has to list all of its assets. Those assets will be sold and the proceeds used to pay off the creditors of the business. Since in most cases the assets available for sale do not amount to enough to cover outstanding indebtedness 100%, creditors have to content themselves with receiving only a partial repayment of all the money owed them.
To handle the sale of assets, as well as to monitor the financial condition of a petitioner, the Bankruptcy Court appoints a trustee to oversee each case. Usually an attorney, the trustee’s responsibility is to keep the court informed of the particulars of a case, build distinct that petitioners identify fully and completely not only all of the indebtedness they have, but also all of the assets which can be used to pay off that debt.
Unlike bankruptcy filings under Chapter 7 and Chapter 11, Chapter 13 bankruptcy filings ask the court essentially to have creditors back off and give the petitioner time to develop a plan to pay off outstanding debts. In other words, petitioners think (in most cases) that they can continue to operate on a sound financial basis, but due to an unexpected development, they find themselves temporarily short of funds to meet their obligations. Thus, with a Chapter 13 bankruptcy filing, the court can say to creditors (1) cease asking for payment for the time being, and (2) you’ll accept your money once the petitioner has a chance to carry out a current financial plan approved by the court.
Recently, a number of big corporations in the United States, especially airlines, have resorted to bankruptcy in order to keep themselves afloat. While they are perfectly within their rights to do so, what some have found objectionable is a tendency on the fraction of some companies to use bankruptcy to jettison long-term outstanding obligations, such as pension plan payments.
While arguments can be made on both side of that issue, the fact remains that bankruptcy is an integral part of the U.S. legal system. And entities–either individual or corporate–which find themselves in financial difficulties are able to obtain relief–either temporary or permanent–from their financial woes.
Related Posts
Filed under Sole Proprietorship Bankruptcy by on Oct 12th, 2010. Comment. 
No, the federal federal government may want to not intervene to conserve great organizations from bankruptcy When organizations like AIG go under, and are paid with big amounts of taxpayer finances, we see that even in a drowning corporation the CEO’s nevertheless locate techniques to dish out $10,000 to $6.5 million bonuses to organization executives It’s not their your money so they have no correct to expend it.
That’s precisely what occurs when you give greedy men and women bucks They commit it and request for even more The federal federal government doesn’t give bailouts to little organizations, so why will need to they give bailouts to big companies Just simply because they employ a lot of workers When the govt interferes with enterprises, they just dig an even bigger hole so the stock market can go decrease and decrease.So far about $180,000,000,000 of tax payer hard earned cash has been given to AIG $180 billion Just look how huge the number is Thinking about there being about 300 million a great number of people in the US, and my rough estimate of about 180 million employed, taxpaying, operating visitors that means each functioning American has paid about $1,000 to conserve AIG from heading down, and to thank us they take an additional dollar from us all and give bonuses to the executives They take OUR revenue, to line their pockets.I merely believe this is proof that when the federal govt messes with gigantic businesses and gives bailouts it really is basically less profit in our pockets and much more in the corporation’s I haven’t seen any AIG commercials lately, that would lead me to believe they nevertheless aren’t doing well With each and every functioning American’s thousand dollars, they nonetheless haven’t recovered yet That need to tell you they really don’t need to have anymore of our funds to go toward wasteful spending.Why can’t we just let them go down They’re just heading to go expend OUR dough on a jet or some thing If i was to inquire somebody if i could have some of their profit, I certainly wouldn’t drive my Rolls Royce to their home to request for it!(referring to CEO’s of Ford, Chrysler and GM heading to Washington in private jets to request for taxpayer dollars)The last thing the taxpayers require in this economic depression is to be spending billions of dollars on private jets for CEO’s We basically must not have to commit our dollars to maintain a organization afloat, It is really referred to as a corporation for a cause You do not go into online business to TAKE bucks from buyers Corporations were not developed to be a purpose to request for taxpayer your money They are meant provide goods or services to the citizens, and in return they EARN wealth, not TAKE it .
Related Posts
Filed under Sole Proprietorship Bankruptcy by on Oct 9th, 2010. Comment.
As we said earlier, a joint venture is not an entity, but the reason for the entity. A joint venture can be individuals, corporations, LLCs or even limited partnerships. There are tax advantages to all of these types of holdings. How you should hold your joint venture depends upon the size of the project and how long you plan to be involved in the project.
Corporation
A corporation is a separate entity. It can open a bank account, pay taxes and go bankrupt. Because a corporation is its own entity, it is the safest way to start a business. By funneling everything into the corporation, you limit the liability of the other parties.
Two corporations or other types of business can form another corporation. A corporation will need people, however, to be officers of the entity. You also need a registered agent. The registered agent is usually the attorney who fills out the articles of incorporation and will support up with the annual reports.
There are two types of corporations – a C corporation and an S corporation. You will most likely charter your joint venture under an S charter in that you will not be selling stocks. An S corporation, or a Sub S, as it is often called, is limited to the number of shares of stock it can issue. An S corporation can only issue 100 shares of stock.
The stockholders are the real power in the corporation. The stockholders do not have to be the same people who are officers of the corporation. They can be businesses or individuals. Their ownership of the corporation is not made public – the officers and registered agent are public information.
A corporation has tax benefits that are not afforded to individuals. That and the fact that by putting everything into a corporation puts a limit on the liability of those keen in the corporation makes it an attractive entity to believe when you are considering how to beget a joint venture.
LLC
An LLC is a limited liability company. Like a corporation, you have to file the LLC with the state. The filing fees are usually higher for an LLC, but this type of company offers the same protection as a corporation in that it is its possess entity, but without the cumbersome paperwork that is keen in maintaining a corporation. A corporation is obligated to have regular meetings and keep minutes of the meetings. An LLC does not have the same obligation and is an easier type of entity to maintain. Because it gets the same type of tax breaks and offers the principals the same protection as a corporation, this type of entity is often preferred over a Sub S corporation. You cannot sell stock in an LLC.
Limited Partnership
Some people confuse a limited partnership with a joint venture. A tiny partnership is an entity between two or more individuals for no specified period of time or for a particular project. A joint venture is similar to a limited partnership in that it is a legally binding agreement between two or more individuals, but whereas the limited partnership is not limited to a specific project or endeavor, the joint venture is. And the joint venture can be comprised of many different types of entities.
Sole proprietorship
You can plot up shop and start up your own business as a sole proprietor without having to file any paperwork with the state or even talk to an attorney. The free enterprise system allows anyone to just open a business as a sole proprietor. You will have to claim income taxes on this business, but can do so on your individual income tax statement. You will have to file a Schedule C for a sole proprietor business. You can enter into a joint venture as a sole proprietor, but be aware that you are offered no personal protection. If the joint venture files bankruptcy, you may be also finding yourself in bankruptcy court. The same goes if the joint venture is sued. If you gain your business as a sole proprietor, you will want to make sure that the joint venture is held in a protective entity such as a corporation or LLC.
If the joint venture is held as a sole proprietorship, then any liability for the joint venture will fall upon the entities or individuals that make up the joint venture.
Individual ownership
If you are not worried about liability and are in a small joint venture with another individual, you can each take ownership of anything in the joint venture as individuals. If, for example, you form a joint venture with someone to purchase a foreclosed house, you can each select ownership of the property as tenants in common. Any assets that the joint venture owns should be held by each of you as tenants in current.
Prior to joint ventures, corporations, limited partnerships and LLCs, it was not unusual for people in business with one another to manage their business by making sure that all assets and liabilities were held as tenants in common. Tenants in common means that both parties are owners of the asset. Unlike joint tenants, when property or other assets is held as tenants in common, and one of the tenants dies, the heirs of the deceased party will be entitled to their share of the assets. With joint tenancy, the other partner would be able to claim the assets as their own.
Before our society became so litigious, it was not unusual for parties to strike out a verbal agreement and hold assets and property as tenants in common. Today, however, you are better off to gain the protection of a protective entity such as a corporation, limited partnership or LLC when you are entering the business world.
Related Posts
Filed under Partnership Bankruptcy by on Aug 18th, 2010. Comment.
By Peter Gitundu
Bankruptcy normally implies a new start for people who are going through financial distress. Though many believe that this financial state is for people who are irresponsible with their spending habits, this is just a misconception, since there are people who get themselves into this unexpectedly. Corporation insolvency happens when businesses are not in a position to pay their debts.
Chapter 7 has the assets of the corporations assets sold in order to enable payments while chapter 11 is a chance for the business to reorganize as they pay their debts. What happens to a shareholder when the business decides to file a corporation bankruptcy petition? An individual may not be affected as such in case the business decides to go this way.
The individual will only be affected if the debts fall under his name and he is solely liable for them. In this case, an automatic stay on the assets of the business may not apply. Corporation insolvency is a way of solving a financial crisis in a business. This may not be affected by the designation of the chapter that the corporation is under. This may be sub chapter s corporation or a chapter c corporation.
It is however important that the business in debt to finds out which designation it is under before going through the petition filing. Filing a bankruptcy petition may seem a hard venture that may scare off an individual or business, but it is important that the debtor finds out the best way to go through it.
Peter Gitundu Creates Interesting And Thought Provoking Content on Finance. For More Information On How To Deal With Bankruptcy, Read More Of His Articles Here DEALING WITH BANKRUPTCY If You Enjoyed This Article, Make Sure You SUBSCRIBE TO MY RSS FEED!
Article Source: http://EzineArticles.com/?expert=Peter_Gitundu
http://EzineArticles.com/?What-Corporation-Bankruptcy-is-About&id=2432107
Related Posts
Filed under Uncategorized by on Aug 16th, 2010. Comment.