Bankruptcy refers to the financial collapse of an organization or business. A petition is filed by a company when a company is unable or unwilling to pay its financial obligations. The petition lists all outstanding assets and liabilities.
Different Types of Bankruptcy
Many small businesses file for bankruptcy because they are unable to survive the financial liability. The market has seen a decline in the number of organizations that survive over the years. These are the three types of bankruptcy mentioned in the law.
Regular Income and Adjustment of Debts
The regular income is used to adjust the debts. This type of bankruptcy is usually used by individuals. This petition is for sole proprietorships, which cannot differ from their owners. The sole proprietorship goal is to reorganize. This petition cannot be filed. The form of payment to creditors is explicitly mentioned in the petition.
This bankruptcy option is for businesses with no future or who cannot survive. This type of petition serves the primary purpose of liquidation. This bankruptcy can be used by sole owners, corporations, or partnerships. This petition is filed when the future of the business cannot be reconstructed.
Reorganization of a Business
This is the best option for businesses who have a chance of coming back to the market in the near future. This type of bankruptcy is used by corporations and partnerships. This type of bankruptcy is also used by sole proprietorships whose income exceeds a certain limit. It is an important step.
This article was written by Alla Tenina. Alla is one of the best Bankruptcy Attorney in Sherman Oaks, and the founder of Tenina law. She has experience in bankruptcies, real estate planning, and complex tax matters. The information provided on this website does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available on this site are for general informational purposes only. Information on this website may not constitute the most up-to-date legal or other information. This website contains links to other third-party websites. Such links are only for the convenience of the reader, user or browser; the ABA and its members do not recommend or endorse the contents of the third-party sites.