The failures of large corporations in recent years have garnered intense media attention: from the infamous Enron case to the more recent bank collapses, corporate bankruptcy often has negative consequences for a large number of people. Small businesses, on the other hand, usually go unnoticed by the mass media.

Despite the greater number of people affected in cases like Enron, the effects of small business bankruptcy can be much more severe on the owners and any employees. Since they have more limited means than larger companies, small businesses can be more susceptible to fluctuations in local economies. Local restaurants, for example, commonly go out of business during economic downturns, because people are less likely to dine out when the economy is weak.

If a small business owner does decide to file for bankruptcy, there are certain conditions under which the owner(s) may be able to file under bankruptcy laws used more often for individuals than businesses. Since many small businesses fall somewhere in between these two poles, special stipulations have been enumerated which determine which set of laws to use in these cases.

The US Bankruptcy Code provides several different bankruptcy path, each with different requirements. With the exception of Chapter 12, which is reserved for use by farmers and fishermen, both businesses and individuals can file under any of these chapters. Chapter 7 is the most common type of bankruptcy overall and is used extensively by both individual and businesses. In practice, Chapter 11 is almost always reserved for companies. Likewise Chapter 13 is largely for individuals.

A Chapter 7 bankruptcy case, often called a “straight” bankruptcy, is one in which the debtor liquidates certain assets to repay creditors and establishes a repayment plan. “Liquidating assets” here essentially means turning over saved money and/or selling possessions to pay the creditors back. Fortunately, exceptions are made for “essential” property. In many cases this means individual debtors will not be forced by the court to sell personal possessions, vehicles, etc. Often, however, such steps might be necessary to get funds, or a house (for example) might be repossessed. Chapter 7 cases are the most common.

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If you are filing for bankruptcy, then the simple fact of the matter is that you are doin so because your finances are so poor that you have no choice. After all, it isn’t like you are filing for bankruptcy for fun and games! It is natural then that you would want to avoid further debts or bills of any sort.

It is often for that reason that so many people filing for bankruptcy ask about the possibility of going it alone, without the services of an attorney. Often these people have been advised by friends and family that it is possible, they sometimes know someone who has done it themselves successfully.

However, really, since 2005, skimping on your legal help just to avoid the bill is the equivalent of setting yourself up for a complete disaster.

Under pressure from lobbying credit companies, Congress passed some huge overhauls to the Bankruptcy Code in 2005. This was designed to ensure that bankruptcy could not be abused by those who were unwilling to repay debts rather than unable. While most people who were eligible for bankruptcy before 2005 remain so, there are a number of new added complications. One of these is the means test, which is designed to establish whether or not you really do need to declare bankruptcy.

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If you are in a situation where you are simply unable to pay off your outstanding debts and even with significant changes to your expenditures you will be unable to pay them in the foreseeable future, then the chances are that you really should think about declaring yourself bankrupt. However, many people even knowing that this is the best move for them are put off by the cost of declaring bankruptcy. Some are completely unaware of the cost of declaring bankruptcy but just assume it to be higher than it actually is.

The court fees are relatively small. Chapter 7 bankruptcy incurs a fee of $274 and Chapter 13 bankruptcy incurs a fee of $189. Now, this might seem a fairly hefty fee for someone who has pretty much nothing, but consider the fact that bankruptcy can secure your long term financial freedom and this is pretty good

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