Guide to Small Business Bankruptcy: Chapter 13 Edition
Bankruptcy is complicated and is best undertaken with the guidance of an experienced attorney. Business owners may file under Chapter 7, Chapter 13 or Chapter 11, depending on several factors. A Chapter 13 Bankruptcy Attorney can help you determine the best available choice for your situation. This month we will discuss Chapter 13 Bankruptcy. Larger businesses or those who are considered separate legal entities will have to file under Chapter 11, and that will be a subject for next month.
The bankruptcy chapter you file under depends on your company’s debts, assets, structure of your business, and whether you plan to continue running your business. Chapter 13 is a good choice, and typically less expensive than Chapter 11, but you must meet certain conditions to file. A good Philadelphia area Chapter 13 bankruptcy attorney will help you avoid making mistakes that could cause you to incur penalties, or even cause your case to fail.
Who Can File for Chapter 13 Bankruptcy?
Only individuals are permitted to file for Chapter 13 bankruptcy protection. Therefore, if your business is a sole proprietorship, you are qualified to file for Chapter 13 bankruptcy protection. When your business is organized as an LLC, partnership, or corporation, you will be forced to choose Chapter 11 or Chapter 7.
Advantages of Chapter 13
Chapter 13 is excellent for businesses that plan to continue operation after bankruptcy. These kinds of businesses will have a business model, product, service, or client list remaining. Many of these businesses are only failing due to bad luck, bad debts, or some other element out of the control of the owner. Chapter 13 is advantageous because you are able to keep your assets while reorganizing your debt, and set up a reasonable payment plan. Since you retain the assets of the company, you can continue operating your business during the reorganization of your debt.
Disadvantages of Chapter 13
The largest disadvantage of Chapter 13 is that, during the repayment period, from 3-5 years, you must use all disposable income to pay debts. Furthermore, while you can keep nonexempt assets, you must pay unsecured creditors an amount equal to the value of the retained assets – which can substantially increase the total amount you are required to pay. Finally, Chapter 13 only discharges your personal liability for the debts – creditors may still attempt to attain your business assets.
Filing Chapter 13 can be complicated, especially for a business, so be sure to consult a professional. A Chapter 13 bankruptcy attorney from Alfred Abel Law Offices can help guide you through bankruptcy. Alfred Abel Law Offices has over 25 years of experience in guiding individuals and business through the process of filing Chapter 13 bankruptcy as a way to stabilize their debts.