When you’re considering bankruptcy in Maryland (or elsewhere), it pays to know as much as possible about the Chapter 13 discharge process, how bankruptcy can stop foreclosure, and the differences between other types of debt relief—and that’s especially true if you’re a business owner.
The differences between Chapter 13 bankruptcy and Chapter 11 bankruptcy are pretty substantial when you’re a small business owner, so here’s what you need to know.
Chapter 13 Bankruptcy vs. Chapter 11 Bankruptcy for Small Business Owners
In some ways, Chapters 13 and 11 are fairly similar. Each allows you to continue running your business and propose a plan to restructure your debt. Depending on the legal requirements you’re facing, you may:
- Have enough time to sell assets you don’t need any longer (or that you can’t afford to keep)
- Keep property that you need to operate your small business
- Change your payment terms on secured debts
- Discharge some debts that you can’t pay
The issue is often that many small businesses aren’t eligible for Chapter 13 bankruptcy—and they’re stuck filing Chapter 11.
A Word on Eligibility for Chapter 13 Bankruptcy for Business Owners
If your business is a sole proprietorship, you may be able to file for Chapter 13 bankruptcy on your own behalf (not on your business’s behalf). This type of debt relief is only available to people with regular income who owe less than $394,725 in unsecured debt and $1,184,200 in secured debt.
Unsecured debts are debts that aren’t backed up by collateral, such as credit card bills and other expenses.
Secured debts are debts that involve property the creditor can take if you fail to pay, such as car loans and mortgages.
Why Would You Choose Chapter 13 as a Small Business Owner?
In many cases, small business owners who operate as sole proprietors choose this type of bankruptcy because it allows them:
- To prevent foreclosure
- To make up mortgage payments
- To pay back taxes while preventing interest from accumulating on tax debt
Generally, small business owners are permitted to keep the property that keeps them in business because it’s exempted from the case.
Do You Need to Talk to a Lawyer About Chapter 13?
If you’re a small business owner who operates a business as a sole proprietorship, you may benefit from talking to a Chapter 13 lawyer in Maryland, NoVA, and D.C.
Call us at 301-933-2595 for a free bankruptcy consultation. We may be able to help you get a fresh start, and the sooner you get in touch, the sooner we can figure out what will benefit you most.