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What are the bankruptcy options for businesses?

On Behalf of | Jan 31, 2022 | Blog, Business & Commercial Bankruptcy

Filing bankruptcy as a business differs from filing as an individual. You have different chapters you may file that target the needs of a business.

Nav explains what chapter of bankruptcy you choose depends a lot on the type of business structure you have.

Chapter 7 or 13

These are options you can use personally and as a business. Chapter 7 or 13 is an option if you are a sole proprietor and claim your business profits and losses on your personal taxes. Chapter 7 may involve selling assets if they are not exempt. Chapter 13 is a repayment plan that may allow you to save your assets. Both make it possible to continue running your business as long as you can retain enough assets to do so.

Chapter 11

Chapter 11 is a restructuring plan. You will benefit from this as a larger business. It is also beneficial for LLCs, partnerships and corporations that wish to keep operating. You will need to create a repayment plan to repay as much of your debt as possible. It is similar to Chapter 13, but Chapter 11 is expensive to file, which is why usually only large businesses use this option.

Chapter 12

Chapter 12 is available if you have a family farm or fishing business. It is a repayment plan. You must meet the specific business requirements to file this chapter.

It is important that you choose the proper chapter before you file bankruptcy. The court can and will dismiss your case if you get it wrong. You will then have to go through the filing process all over again.

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