As you were growing up, you probably thought of bankruptcy in a very negative light. However, as you move through adulthood, there’s a good chance that you understand both the good and bad aspects of bankruptcy as a useful way to reset your personal finances or your business requirements.
Sometimes bankruptcy is your fault in that you have very poor financial management. Other times bankruptcy is because of something that you couldn’t control, for example, a medical emergency of some sort that you didn’t have insurance for.
Regardless of how you approach the idea of bankruptcy, though, the more knowledge you have about the matter, the more it can be something that you are less anxious about while also being more in tuned to win to use it appropriately. You have to know what Chapter 7 bankruptcy is. You have to understand how Chapter 13 bankruptcy works in different situations. And if you’re thinking of bankruptcy from a professional perspective, it’s essential to understand the statistical likelihood of small business failure within a time frame.
When you file for Chapter 7 bankruptcy, you are trying to clean your slate as much as possible. You can have debt all over the place. You could be drowning in credit card debt. You could be behind on mortgage payments. Your loans might be so far out of control that you will never pay them back. When you file Chapter 7 bankruptcy, it gives you a big reset button. Your credit will be obliterated, but you will have a chance to start anew without having to worry about the specter of debt weighing down on your shoulders.
Working through Chapter 13 bankruptcy is a slightly different concept. Talk to a lawyer about Chapter 13 bankruptcy and see why it is often explained as a repayment plan rather than as a full reset like you’d get in chapter 7. It can be difficult for the average person to figure out the difference, and that’s why having a lawyer on your side to explain the specifics is so important. If you pick the wrong kind of bankruptcy that can follow you around potentially for the rest of your life.
The Likelihood of Small Business Failure
The idea of bankruptcy is closely associated with trying to open a small business. Depending on how you incorporate your business, different aspects of your finances may or may not be liable for business expenses. You will try to make the best decision possible concerning opening your business, but the rate of failure for small businesses is very high within the first five years of operation. Creating the best business plan possible will help you through this hurdle, but it is not a magic bullet.