Learn About the Differences Between Chapter 13 Individual and Business Laws

Under Chapter 13 laws, individuals can find some level of protection from creditors while working to repay them. This type of bankruptcy does not apply to incorporated businesses, but only to individuals who may own a sole proprietorship, a partnership or another form of non-corporation. Those who wish to file this type of bankruptcy need to understand bankruptcy laws and how they can affect their individual needs. It is always best to get specific information from an attorney.

Understanding Chapter 13 Laws for Individuals and Businesses

If you do own a larger business that has been formally incorporated, you cannot apply for Chapter 13 bankruptcy. Rather, other forms of bankruptcy, such as Chapter 11 may apply in your situation. For those who own a small business that is a sole proprietorship or a partnership, the laws regarding these properties are quite unique. Individuals will need to take into consideration some very important aspects when filing bankruptcy.

• If you file Chapter 13 bankruptcy, your personal and business debt have no separation. This means that when you file as an individual, you can also include your business debts.
• For those who file Chapter 13 bankruptcy, laws state that assets belonging to the business are not separate from those of the individual. This is not a problem in most Chapter 13 cases since you are unlikely to lose property in this form of bankruptcy.
• In Chapter 13 bankruptcy, a repayment plan is likely to include business debt. However, if the lender agrees to continue offering the loan to you, you can reaffirm the debt and continue paying outside the terms of the repayment plan. This is an ideal situation for those who are paying suppliers. However, debts must be kept current.

In unique situations, it may become difficult to operate your business under a Chapter 13 bankruptcy. However, it is important to note the business expenses and maintenance costs throughout your bankruptcy documentation. The bankruptcy trustee can also help to ensure your bankruptcy filing, and your monthly repayment, do not cut into the profitability of your business. If it does, your income may drop, making it even harder to make those monthly repayments to creditors. The trustee wants to avoid this.

Hiring an Attorney

For those who are concerned about Chapter 13 laws for individuals and businesses, keep in mind an attorney is the best resource. The attorney will work with you to understand what your particular needs are and help you to make the right decisions moving forward.