Small Business Owner Debt Relief Options: Chapter 11 Bankruptcy
Depending on the circumstances, small business owner debt relief options include:
Chapter 7 bankruptcy – For debtors that do not have the means to restructure the finances may seek debt relief by filing a Chapter 7 bankruptcy. When you file a Chapter 7 business bankruptcy, a trustee is appointed, assets are sold, and creditors are paid from the proceeds of the sale. A Chapter 7 bankruptcy is open to partnerships, limited liability companies, and corporations. Individuals who own and operate small businesses as sole proprietorships also may file bankruptcy under Chapter 7 provided that they meet the income requirements.
Chapter 13 bankruptcy – Chapter 13 can be a small business owner debt relief option for companies owned and operated by individuals (a sole proprietorship). Only individuals may file Chapter 13, partnerships, limited liability companies, or corporations may not file a Chapter 13. Chapter 13 eligibility also includes a debt limit. From April 2016, any individual owing more than $394,725 in unsecured debt or $1,184,200 in secured debt is not permitted to file a Chapter 13.
Chapter 11 bankruptcy – Another small business owner debt relief option Chapter 11 bankruptcy. Generally, small businesses avoid filing a Chapter 11 because it is costly, risky, time-consuming, and complicated. However, a Chapter 11 allows small business owners to restructure and continue in operation.
What Is Chapter 11 Bankruptcy?
Chapter 11 bankruptcy is part of the United States Bankruptcy Code designed to give entrepreneurs a chance to reorganize their finances in an attempt to generate a profit. Debtors are required to submit a reorganization plan to the court indicating how they will use future income to pay back creditors. Under Chapter 11, business owners may also can sell some or all of its assets so it can downsize its business if required.
Other Small Business Owner Debt Relief Options
In many cases, business owners attempt to avoid bankruptcy all together and opt for one of the following:
If you are not sure what option is best for your business, speak to one of our experienced business debt relief lawyers today.