Chapter 13 of the Bankruptcy Code is generally used by individuals facing overwhelming debt who have enough resources to pay back some of their creditors. It is only available to businesses in situations where a company is essentially intertwined with its owner.
If you are a business owner who is tired of collection calls and minimum payments, now is the time to speak with an Edison Chapter 13 business bankruptcy lawyer. A compassionate business bankruptcy attorney from Gillman Capone can answer your questions about how filing for bankruptcy could help you on a personal and professional level.
A Chapter 13 bankruptcy is designed primarily for individuals, but business owners in Edison can also benefit from its protections under certain circumstances. Sole proprietors, who operate their business as an extension of themselves rather than as a separate legal entity, are eligible to file under Chapter 13 because the law views the debts of the sole proprietorship and the individual as one. Creditors of a business can attempt to collect from the sole proprietor directly, so, in this case, the business owner can shield themself using Chapter 13 of the Bankruptcy Code.
Most other types of businesses, including corporations and limited liability companies, are not permitted to file under Chapter 13. The same is true of partnerships, even though they have a lot in common with sole proprietorships. While creditors can reach an individual’s assets directly in a partnership, the fact that ownership of the business is shared with someone else eliminates the possibility of using Chapter 13.
Overall, Chapter 13 is best suited for small business owners operating as sole proprietors whose personal assets are at risk of collection efforts by the company’s creditors. It provides a pathway to reorganize finances while keeping operations running and avoiding liquidation. An attorney from our Edison office can answer questions about Chapter 13 and outline the legal options when moving forward with business bankruptcy.
There are numerous benefits to filing for bankruptcy under Chapter 13, especially if the goal is to keep a business functioning and emerge from the process debt-free. Our Edison attorney can advise how this form of bankruptcy can benefit a business owner.
One of the biggest benefits comes into play right away. As soon as a debtor files a petition, they are under the protection of the automatic bankruptcy stay, which instantly halts all attempts to collect the debts. Any lawsuits that have been filed must be paused, and creditors are barred from filing more until the case is resolved. They can no longer make contact about the debt and must release any garnishments or levies.
While immediate relief is important, the ultimate goal of filing for bankruptcy is the discharge of debts. Chapter 13 requires a business owner to create and follow a 3- to 5-year plan of reorganization. If they comply with this court-approved plan, the judge overseeing the bankruptcy case can discharge the remaining unsecured debts. This could allow the debtor to exit the process free from delinquent debt and with a business primed to succeed.
While a Chapter 13 bankruptcy is not available to every business, there are significant benefits if you qualify – usually as a sole proprietor. By filing, you can discharge a large amount of debt and potentially get your business back on track. Reach out to our team and schedule a consultation with an Edison Chapter 13 business bankruptcy lawyer as soon as possible; Gillman Capone knows how to handle these cases and advises on your best options.
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