Individuals and businesses can hit a bump in the road at any time. Some can be overcome easily, but others may require more substantial measures to fix the problem. One available solution may be filing for Chapter 7 bankruptcy.

Two California YMCAs were permanently closed on January 11. The facilities closed were in Riverside and Hemet. These centers announced last month that they would be filing for bankruptcy. They originally filed for Chapter 11 reorganization bankruptcy to try and handle their financial problems. On January 14, however, their financial problems worsened after a deal with a sister YMCA fell through. The deal would have given the sister YMCA control of the facilities.

After the deal fell through, the closed YMCAs decided to change their filing from Chapter 11 reorganization to Chapter 7 liquidation. This new filing will most likely lead to the sale of their assets and property to satisfy their debts.

The court documents show that the organization has assets of over $5 million but liabilities of $4.6 million.

There are two types of bankruptcy for which a business can file. Chapter 11 is the most common form, which allows the business to reorganize and restructure its debt without closing. Chapter 7 allows the business to liquidate its assets to pay for debts and eliminate debt that cannot be paid for by the assets. To file for Chapter 7 bankruptcy, the individual must qualify for the protection. There must not be enough disposable income based on the amount of debt and the income to pay creditors even at a restructuring level.

Filing for bankruptcy will not only eliminate debt, but also, it will stop creditor actions such as foreclosure.

Source: pe.com, "REGION: Riverside, Hemet YMCAs shuttered amid bankruptcy," Richard K. De Atley, Jan. 15, 2013