Is Chapter 13 Bankruptcy for Individuals or Businesses?
Filing for bankruptcy is a tool individuals, including those who own and operate sole proprietorships, can use to restructure their finances, discharge debts, and find a more solid financial footing. Understanding the Bankruptcy code Can be a challenge, making it hard to know if bankruptcy is a good fit for your situation. How do you know if you are eligible to file for bankruptcy and which type of bankruptcy to file?
The bankruptcy lawyers at Sasser Law Firm have been helping individuals and businesses in North Carolina for more than 20 years. Our exclusive focus on bankruptcy cases makes us ideally suited to help you.
Contact us now by phone or online for a free consultation about your best financial options.
Chapter 13 bankruptcy is limited to individuals.
If you are the sole proprietor of a business, you can apply for Chapter 13 bankruptcy, as long as you meet the other eligibility requirements.
If you own a small business that is set up as a separate business entity, such as a corporation or LLC, you may be able to use Chapter 13 bankruptcy to remove your personal liability that is connected to business debt such as bank or landlord guarantees. But you will not be able to use Chapter 13 to address the debts of the business entity. A business entity such as a corporation or LLC can liquidate under chapter 7 bankruptcy or reorganize under chapter 11 bankruptcy.
How Does Chapter 13 Work?
While filing for Chapter 7 bankruptcy will sometimes result in the liquidation of non-exempt assets, Chapter 13 bankruptcy cases work differently. Instead of selling off non-exempt assets (if any), in a Chapter 13 bankruptcy case, you get to keep some of the assets while restructuring your debts so you can find a more sustainable way forward.
Upon filing for Chapter 13, you’ll get an automatic stay once you file your case with the bankruptcy court, which blocks most creditors from taking further action against you or your property. If you have had one or more pending chapter 13 cases is the prior year, there may be limitations on the automatic stay.
You’ll then put together a plan to restructure your debts. This plan could involve spreading your payments out over a longer time frame, getting your interest rates lowered, having the principal of your debts reduced, and other steps.
Once you submit your plan, it needs to be confirmed by the bankruptcy judge. After your plan is confirmed, the chapter 13 trustee will disperse the money to the creditors pursuant to your plan. Assuming you follow the terms of your plan and make all of your payments, you will receive a discharge which is inclusive of many types of debt.
How Do I Know Chapter 13 Is Right for Me?
Chapter 13 is not necessarily the right answer for everyone. There are limitations to be aware of and cost and benefits to be weighed. There may be other options that could better fit your situation. Your best bet is to talk to a knowledgeable bankruptcy lawyer who can explain your options.
Do I Need to Hire a Lawyer to File Chapter 13 Bankruptcy?
Individuals are permitted to represent themselves in chapter 13. However, you will likely benefit retaining an attorney. An attorney can help you put together a reorganization plan and represent you in court to make sure interest are maximized. If a registered entity such as a corporation or LLC files chapter 11 then it must be represented by an attorney.
Our firm has four experienced bankruptcy attorneys standing by to answer your questions. Get your free initial consultation today by calling our office or visiting our contact page.
For more than 20 years, the Sasser Law Firm has been helping individuals and business owners sort through financial hardships to see the light at the end of the tunnel. Our North Carolina bankruptcy attorneys are all board-certified specialists, which means we have passed a complex exam, undergone a thorough peer review, and continue to earn legal education credits in this ever-evolving area of law.