If you’re a small business owner and are overwhelmed by your debt, filing for bankruptcy may be the best course of action for you. Finding the best option for your situation is important, especially if you plan on keeping your business open. There are two types of Bankruptcy options for debtors who wish to stay in business-Chapter 13 and Chapter 11 Bankruptcy in Fort Myers, Florida. While both of these options have similar attributes, like allowing you to keep property to keep your business open and will modify payment terms, there are some differences to understand before choosing what’s best for your business before you file.
The eligibility requirements for Chapter 13 Bankruptcy are more strict than Chapter 11’s requirements. Basically anyone in business can file for Chapter 11 Bankruptcy in Florida. There are no debt requirements and individual businesses, as well as corporations, joint ventures, partnerships, and limited liability businesses are all eligible. On the other hand, the requirements for Chapter 13 Bankruptcy include:
- Must operate your business as a sole proprietorship. Corporations, partnerships, and other types of businesses are not eligible for Chapter 13 Bankruptcy.
- According to an article from The Bureau of National Affairs, “under the current laws, individuals with secured debt greater than $1,149,525 or unsecured debt greater than $383,175 don’t qualify for Chapter 13.”
Even though the eligibility requirements are less strict for Chapter 11 Bankruptcy in Fort Myers, Florida, that doesn’t necessarily mean that it will be the best course of action for every business. Make sure to discuss your options with an experienced bankruptcy lawyer and weigh the pros and cons of each restructuring option.
Chapter 11 Pros & Cons
For many, Chapter 11 has many advantages and less hoops to jump through to be able to file for this type of bankruptcy. The main advantages of Chapter 11, when compared to Chapter 13 include:
- More Time To Pay Debt – Filing Chapter 11, allows for the debtor to have more time to pay their debt owed. Three to five years is the usual amount of time, but this can be extended if needed.
- Keep Your Disposable Income – Unlike Chapter 13, Chapter 11 allows you to keep your disposable income if it meets the requirements.
- Long Process – One of the main disadvantages of a Chapter 11 Bankruptcy in Fort Myers is that the proceedings can sometimes be a long and complex process. However, there are some factors that can expedite this process. If the debtor owes less then $2,566,050 and is engaged in business activities, the entire process may be much faster and less expensive for them.
Chapter 13 Pros & Cons
One of the biggest advantages of Chapter 13 Bankruptcy is how divorce obligations are handled. Under Chapter 13, you will be able to:
- Discharge “nonsupport obligations” – However, neither Chapter 13 or 11 allows for support obligations, such as child support, to be discharged.
- Short Process – In general, Chapter 13 proceedings move along a lot faster then Chapter 11 Bankruptcy proceedings.
- No Extensions – There are no exceptions to increase the payment period. Debts must be paid off in no more than five years.
- Commitment Period – During the “commitment period”, the debtor must turn over all of their disposable income. In Chapter 11 proceedings, if the debtor meets certain requirements, they are able to keep this income.
To find more information about Chapter 13 and Chapter 11 Bankruptcy for business, visit our Bankruptcy Section and contact us today, to get you started on the path toward financial freedom.