Bankruptcy law is divided into two general areas—business bankruptcy and consumer bankruptcy. Business bankruptcy applies to debts associated with different types of companies, whereas consumer bankruptcy is reserved for individuals with debt problems.
While these two general categories of bankruptcy may seem easy to differentiate, various factors can complicate a filing. For example, if a person runs a small business and frequently commingles business funds and expenditures with personal funds and expenses, their creditors may be able to draw the business into a consumer bankruptcy.
If a person can afford to pay some of their creditors, they may want to use bankruptcy to restructure debts. This means that they pay out what they can over the course of the bankruptcy. At the end of the bankruptcy, creditors can no longer harass them to pay debt. If a debtor is in such dire circumstances that they simply cannot afford to repay anything, the bankruptcy court may be able to wipe out their debts entirely.
Whether a business or personal filing, the first step is to decide which chapter of bankruptcy is applicable to your situation.