Many people wish to turn entrepreneurs and often succeed in their endeavors too. However, not every business idea takes you to the zeniths of the sky, some fight falls flat and leave you with a huge debt to clear. In case you belong to the latter category, there is no need to worry if you are looking to reorganize your debts. U.S. federal laws have come up with Bankruptcy Code to help individual and organizations to overcome their financial losses by filing for bankruptcy under various chapters. Small business owners in need of financial assistance can consider Chapter 13 bankruptcy to come up with a repayment plan based on their type of debt, income, monthly expenses, assets you need to keep your home and business in operation.
The repayment plan in case of Chapter 13 bankruptcy lasts for 3-5 years, depending on the circumstances of the case. Monthly payments are to be made towards the debt you have incurred. However, there are certain points to consider while appraising Chapter 13 for a small business. According to Los Angeles based law firm Recovery Law Group lawyers Chapter 13, which is generally reserved for individuals can be used for small businesses too as they are taken as sole owner and not separate legal entities. However, businesses such as partnerships, corporations, etc. cannot benefit from this Chapter of bankruptcy. However, there are some exceptions, like:
- Business proprietors of some partnerships which are not considered separate individuals, do have the option to file Chapter 13 bankruptcy and use the same reorganization provided for the benefit of the business.
- Business owners of companies which are separate legal entities may be able to file for bankruptcy under Chapter 13, and if liable for any debts personally, can include those business debts in the repayment plan formulated as per Chapter 13.
Benefits of Filing under Chapter 13
In case a small business is able to qualify for Chapter 13 bankruptcy, there are a number of benefits associated with this chapter, including:
- Chapter 13 allows small businesses to reduce secure loan payments on any property required for getting control of your situation, including vehicle, business equipment, etc. and help incorporate the payments in the court-approved repayment plans.
- Any and all business debts which are considered unsecured and non-priority can be discharged or eliminated after the completion of the repayment Most of the times, business debts are not separated from personal debts. However, if your debt is as a result of you being a co-signer (credit card or loan) for the business in question, the creditor may take control of certain business assets to get the money owed to him.
- Small business owners liable for priority debts (taxes) can have them included in their Chapter 13 repayment plans.
- Unlike Chapter 7 bankruptcy, Chapter 13 allows businesses to remain in operation while the repayments are being made. Business owners can keep their non-exempt assets, reorganize their dues and contribute to the monthly payments as per their repayment plans.
In case you are a small business owner and are facing some financial problems which you find difficult to take care off on your own, you need to consult a bankruptcy lawyer to help find a solution to your existing problem.