Owning and operating a thriving business is a hard thing to do and, unfortunately, it may eventually come to pass that your sole proprietorship simply is not turning the profit that it needs to in order to pay for its daily operation let alone your personal wages that are needed to pay for expenses and debts. In the event that your company is not producing enough revenue to support you while you strive to pay off your debts, filing for bankruptcy might be a reasonable option for you to consider.
Filing Chapter 13 as a Business
Any citizen who earns a steady wage has the legal right to appeal to the US Bankruptcy Courts to establish a plan for bankruptcy under the Chapter 13 bankruptcy guidelines. Although smaller companies that are listed as partnerships or as corporations are not permitted to file Chapter 13, sole proprietorships are viewed as being the same entity as the person who owns them. This suggests that it is the owner who is filing for bankruptcy under Chapter 13. This technicality also suggests that debts related to the company are able to be covered under the bankruptcy filing.
Liability for Business Debts
In terms of a sole proprietorship, business debts are generally financed by the owner themselves and are therefore debts that the owner of the company is personally responsible for. Qualifying debts that are not secured or considered a priority are able to be discharged in accordance with your Chapter 11 or Chapter 13 payment plan, provided that your plan is pragmatic and in keeping with the best interests of your lender.
Chapter 13 vs Chapter 11
Bankruptcy under chapter 13 enables a sole proprietor to retain their business assets and reimburse their creditors by way of a payment plan that is based on their six-month median income or company income before the bankruptcy was filed.
The same is true of a Chapter 11 company bankruptcy. The owner’s company assets will generally remain safe while they come up with a strategy to keep their partnership or corporation from flat-lining. In addition to that, both chapters of bankruptcy enable the debtor extra time they can use to sell some property or other company assets that have fallen into disuse so that they may reimburse their creditors.
For the owners of small companies, Chapter 13 bankruptcy has a clear edge over Chapter 11 it allows more kinds of debt to be discharged.
Bankruptcy can be a difficult thing to experience but something that many businesses endure every year. At MJ Watson and Associates, our skilled bankruptcy attorneys in Texas have helped many businesses and individuals work through financial difficulty and are committed to helping you get back on track after you have filed for bankruptcy. It might be a huge decision and you might be afraid of what is to come, but you have options. Please contact our law firm at 817-877-2861 to find out what options are available for you at this time.