Filing bankruptcy can allow a debtor to discharge his or her unsecured non-priority lines of credit and credit card debt. It also can enable someone who is burdened with overwhelming medical bills to receive relief from those debts.
In today’s economy and recession, many businesses have failed. If a business owner is faced with a mounting small business loan (SBA loan) which he or she is no longer able to pay on a monthly basis, bankruptcy can help to discharge that debt. Also, leases can be rejected through the bankruptcy court.
For example, suppose that someone owns a business which sells trinkets. If people quit buying trinkets because the recession has scared everyone away from buying such items, then the business owner is going to have financial problems. If the trinket business has a lease with the building that it is located in that they are paying $3,000 a month for and there is 18 months left on the lease, most bankruptcies will allow the debtor to reject that lease and discharge the remaining $54,000 that is owed on the lease.
Chapter 7 bankruptcy is typically the easier avenue to follow if someone is eligible. In order to qualify for Chapter 7 bankruptcy, the debtor must pass a two part Means Test Analysis. If the debtor does not pass the Means Test, or if the debtor is faced with foreclosure or repossession, then Chapter 13 bankruptcy may be the best route to take.