While there is one word to describe the state of being in an untenable debt situation — bankruptcy — there are four distinct types of filings available to pursue relief from that debt. There are those types designed for individuals and then there are those designed for businesses.

In Kansas, sometimes the two entities are so intertwined that it may be difficult to know which should be pursued. This may be especially true in the instance of the family farm. As a business, the farm might be open to reorganization under Chapter 11 or debt adjustment under Chapter 12 bankruptcy proceedings. At the same time, since so many farms are owned by individuals, there might be instances when Chapter 7 liquidation or Chapter 13 debt adjustment might be called for.

The key to bankruptcy is knowing when and how to take advantage of the full benefits of the law. Individuals, as well as businesses, can obtain new financial beginnings by acquiring that knowledge and using it effectively.

As an example, take a Colorado farm that got caught up in last year’s Listeria outbreak in a variety of states, including Kansas. Faced with financial challenges associated with the recall of the cantaloupes that caused the outbreak, combined with the ensuing lawsuits and the struggling economy, the owners of the farm felt that bankruptcy was the best way to eliminate the debt and move forward.

In their situation, the owners determined that filing for bankruptcy pursuant to business bankruptcy laws was the way to go. But the tough luck that led to the farm’s bankruptcy is indicative of the type of series of events that can just as easily befall individuals and prompt their filing for personal bankruptcy.

Often, an individual or family in a healthy financial situation can suffer one severe stroke of bad luck. Perhaps a person suddenly loses a job or suffers a terrible illness. Maybe a fire or flood causes the loss of a house in a way that an insurance company does not cover. The possibilities are endless, but the point is that the need for bankruptcy can come out of nowhere, and it can happen to anyone.

Bankruptcy laws give those individuals a way out. Debts are eliminated or substantially reduced, creditors stop calling and the individual is given a new financial beginning.

Source: Occupational Health and Safety, “Farm Linked to Listeria Outbreak Files Chapter 11 Bankruptcy,” May 26, 2012

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