Running a successful business is difficult, and there can come a time when your sole proprietorship just isn’t realizing the money needed to pay for business operations as well as your own salary to pay for debts and expenses. If your business is not generating enough income to sustain you while you pay down debt, bankruptcy in Texas can be a viable option to debt relief.
Filing Chapter 13 as a Business
Anyone with a regular income can petition the US Bankruptcy Courts to confirm a bankruptcy plan using the Chapter 13 bankruptcy guidelines. While small businesses that are classified as corporations or partnerships can’t utilize Chapter 13, sole proprietorships are considered the same entities as their owners. This means that technically the owner is filing Chapter 13 bankruptcy. Also, this means that businesses debts can be included in the bankruptcy filing.
Liability for Business Debts
Business debts for sole proprietors are typically backed by the owner and thus are debts that a business owner is liable for personally. Qualifying debt which is not deemed a priority (such as family upkeep payments) or secured (such as a company vehicle loan) can be eliminated at the end of Chapter 13 or Chapter 11 repayment plan, as long as the plan is realistic and in the best interest of the creditor.
Chapter 13 vs Chapter 11
Chapter 13 bankruptcy allows a sole proprietor to keep business assets and pay back creditors through a repayment plan based on your 6-month average income or business income prior to bankruptcy. The same is true in a Chapter 11 business bankruptcy in Texas. Your business assets will typically be safe while you devise a plan to keep the corporation or partnership alive. Additionally, both forms of bankruptcy allow the debtor additional time to sell off property or assets that are no longer needed in order to pay back creditors.
Chapter 13 bankruptcy for small business owners has a distinct advantage over Chapter 11 in that there are additional types of debts that can be discharged. If given the choice, small business owners also steer towards Chapter 13 bankruptcy due to the cheaper filing fee and reduced complexity. One advantage of a Chapter 11 bankruptcy does offer is that the company will be a separate entity and thus, the bankruptcy should not affect the business owner’s credit report or score.
Getting Business Bankruptcy Help
Whether you’re a sole proprietor or owner of an LLC or Corporation, contact a Houston bankruptcy attorney if your business unable to meet the demands of your personal or business liabilities. Bankruptcy protection is a lifeline to business that needs to continue operating as usual, while attempting to restructure debts.