Business Bankruptcy Options

• Business owners and self-employed people can file corporate bankruptcy. Business Chapter 7 bankruptcy eliminates all corporate debts but dissolves the company, according to the U.S. Securities and Exchange Commission. Self-employed people and business owners can keep their operations open while partially repaying business and personal debts under Chapter 11 of the bankruptcy code.
  
  

Chapter 7 Basics

• People with few assets and little disposable income might consider Chapter 7 bankruptcy. This type of debt relief permanently discharges many pre-existing debts, but the risk to the debtor is losing assets such as a home. Also, consumers usually must earn less than their state's annual median income level to file Chapter 7. As of 2011, the yearly median income figure for a single Georgia resident was $39,384, while the annual income level for a family of four in Connecticut was $103,314, according to the U.S. Trustee Program. Also, while Chapter 7 discharges many debts the filing itself damages consumer credit ratings for 10 years.
  
  

Chapter 13 Basics

• People who earned too much money to file Chapter 7 or hope to keep more assets can partially repay debts under Chapter 13. It takes three to five years to finish a Chapter 13 plan; during this time, the consumer cannot get any new credit without a bankruptcy judge's permission. Chapter 13 filings damage credit ratings for seven years from the date of the initial debt relief request. As of 2011, people with more than $360,475 in unsecured debts and $1,081,400 in property-secured debts could not file Chapter 13, according to the United States Bankruptcy Court.
  
  

Ineligible Debts

• You cannot use bankruptcy to reduce or discharge your child support and alimony obligations. Nor can you include tax bills incurred less than three years before you filed bankruptcy; the time frame begins with the date you filed the return and not the tax year. Court fines, bills charged right before filing bankruptcy, credit accounts resulting from lying on applications and any debts related to a crime cannot be included in bankruptcy. Unless you are seriously and permanently disabled or your college went out of business, don't plan on including your federally issued student loans in bankruptcy.