The general purpose behind bankruptcies is to provide debt relief for individuals and businesses. The difference between a business and a personal bankruptcy lies in whose assets are in question and who is responsible for the debts. In a business bankruptcy only the business' assets are in question and the business itself is responsible for the debts. In a personal bankruptcy the individual's assets are in question and he or she is liable for all of the debts.
What would a self-employed businessman AKA a sole proprietor file? He or she would file for personal bankruptcy because in a sole proprietorship all of the company's assets are deemed to be the personal property of the sole proprietor or the owner.
What type of bankruptcy can individuals file? There are two bankruptcies available for personal bankruptcy—Chapter 13 reorganization and Chapter 7 liquidation. Which type you choose will depend on your current income and situation. A Chapter 13 is a debt repayment plan where you usually pay off a small portion of your debts. This usually requires a steady income. In a Chapter 7 liquidation proceeding, all of your qualifying debts will have been discharged. However, you must qualify for Chapter 7 based upon your income.
If you are not certain whether you should file personal or corporate bankruptcy or whether you should file at all, then please contact the experienced attorneys at 1st California Law Inc.