When individuals and businesses encounter debts that they are unable to easily repay, or repay according to the current terms, bankruptcy may be a desirable option. The overall intent of bankruptcy is to allow a debtor to gain a fresh start on their finances by discharging and paying off current, overwhelming debts.
One of the participants on “Real Housewives of New York,” Sonja Morgan, recently completed a bankruptcy proceeding. The bankruptcy was pursued after a judgment was entered against her for $7 million. She had agreed to produce a movie, but ultimately had to back out due to financial demands that she was unable to meet. Her partner company then sued her for the amount of the deal and won. In addition to the amount of the judgment, she also had to cover legal and administrative fees amounting to $2 million. She filed for Chapter 11 bankruptcy to help pay her creditors over time and was able to do so. She sold two of her homes to help meet the judgment demands.
There are various types of bankruptcy for individuals and businesses, each of which provides a way for debtors to overcome significant debts and get a fresh financial start. Among them are Chapter 7 and Chapter 13, which are the most common, and Chapter 11, which was applied in this case. Chapter 11 bankruptcy is typically used by businesses that desire to stay in operation while paying back creditors. This is achieved through reorganization and creation of a disclosure statement for evaluation by creditors. Chapter 11 allows debtors to discharge certain debts, while devising a payment plan for other debts.
Those facing significant debts should understand that bankruptcy may be an option for their situation. There are differing types of bankruptcy that may apply better based on the circumstances of each situation.
Source: Inquisitr, “‘Real Housewives Of New York’ Star Sonja Morgan Announces Her Bankruptcy Nightmare Is Over,” Perry Carpenter, June 18, 2015