Although bankruptcy is technically considered a federal and uniform law, state bankruptcy laws vary a great deal. Although the main facets of the law are administered via federal court, states can accept or reject the federal law's exemption classifications and even offer something entirely different.
Since each state is different, you'll need to research both federal bankruptcy law and bankruptcy law by state that you do business in. While facing bankruptcy can be the ultimate stressor, learning all you can to protect the assets you have left can make a big difference.
Consider the following bankruptcy law information:
1. Residency standards, interstate banking and where your business property is located all factor into state bankruptcy law. It may be best to consult with an attorney specializing in bankruptcies to handle your unique situation.
2. Bankruptcy rates by state may increase or decrease with changes in both federal and state bankruptcy legislation.
3. You may want to evaluate your specific state bankruptcy law and decide whether Chapter 7, 11 or 13 would best fit your needs. You'll need to identify your financial problems and decide whether to liquefy or reorganize.
Research bankruptcy exemptions by stateCertain assets may be exempt from bankruptcy filings by state, based on where you conduct business. Such exemptions can include tools, work equipment, motor vehicles and other property items.
Find state-specific bankruptcy law resources and formsSince each state has its own rules and regulations, being well informed on your obligations is key when it comes to filing bankruptcy. Each state will have specific resources you can use as well as forms and documents you'll need to file.
Compare bankruptcy statistics by stateThe largest indicator of how easy it is to file bankruptcy in a particular state may be to look at the filing statistics there. Statistics could also indicate lenient bankruptcy laws and the overall business climate in the state. But don't think you can just up and move your business to a different state just to be on the receiving end of a better bankruptcy judgment. A federal rule requires two-year residency in most cases.
- By analyzing bankruptcy rate by state, some studies have attempted to correlate the main causes for filing. The economic climate and the level of knowledge by the business owner seem to be the main causes. Bankruptcies were also found to be more likely among older retail companies or those classified as partnerships or sole proprietorship.