With only certain limited exceptions, an individual (alone or together as a married couple) or a business (a sole proprietorship, partnership, or corporation) may file for bankruptcy protection. While debtors filing for bankruptcy protection are usually “insolvent” (meaning that they are either unable to pay their debts as they become due, or that their liabilities are greater than their assets), insolvency is not a requirement for a voluntary bankruptcy filing.
Chapter 7 of the Bankruptcy Code is available to individuals and to corporate entities and is mainly limited for individuals based on income as calculated by: 1) a means test (which is based on average state income for the debtor’s household size), and by 2) a budget test (calculated by monthly net income minus monthly expenses not including debt serve and payments on dischargeable debt).
Chapter 13 of the Bankruptcy Code is available to individuals with “regular income” only (alone or together as a married couple) and is mainly limited based on debt levels in that unsecured debt cannot exceed $419,275. or secured debt cannot exceed $1,257,850.
Chapter 11 of the Bankruptcy Code is available to corporate entities and to individuals who have an ongoing business operation that is generally operating, has income and expenses and/or has assets and needs to reorganize its finances. Subchapter V of Chapter 11 is a “small business” Chapter 11 case and is streamlined Chapter 11 case with several advantages for smaller businesses. A Subchapter V’s debt must be mostly from business activities and the debt cannot exceed 7.5 million (until March 2022 when it may go back to $2.75 million).
Please call us at (631) 271-3737, or e-mail us at firstname.lastname@example.org for a free consultation to discuss such legal options in greater detail.