Types of Bankruptcy for Businesses Versus Individual Filers

How do bankruptcy options differ for business filers versus individual filers? The answer to this question is not as straightforward as it might seem since there are circumstances in which a business owner may be able to file for a type of individual bankruptcy and circumstances in which an individual filer might need to opt for a type of bankruptcy designed for individuals. There are also some overlaps, depending on the type of bankruptcy and the debtor’s goals. Our South Florida bankruptcy lawyers can provide you with more information below, and we can speak with you today about your bankruptcy options if you want to consider filing.

Bankruptcy for Individuals

In general, the two types of bankruptcy that are designed for individual filers: Chapter 7 bankruptcy and Chapter 13 bankruptcy. Chapter 7 is a type of liquidation bankruptcy in which non-exempt assets are liquidated, creditors receive a portion of the money obtained by the trustee through liquidation, and eligible debts are discharged. In a Chapter 13 bankruptcy, no assets are liquidated. Instead, debts are reorganized and the debtor makes routine payments over the course of three to five years as part of a repayment plan. In a Chapter 13 case, some debtors are repaid in full while other types of debt may be eligible for discharge at the end of the repayment plan.

Chapter 13 can also be filed by small business owners of a sole proprietorship. Unlike other types of businesses, the owner and business entity are the same for a sole proprietorship.

Bankruptcy Designed for Businesses

Businesses can also file for a liquidation bankruptcy, but in addition, there are specific types of bankruptcy that are generally designed for or aimed at businesses: Chapter 11, Subchapter V, and Chapter 12. These are all types of reorganization bankruptcies that allow business to remain operational while they restructure debt and repay creditors over a period of time.

Chapter 11 can also be filed by an individual who wants to file for Chapter 13 but has too much debt to be eligible.

Where Overlap Occurs

As we noted above, Chapter 13 can have overlap when a business owner is the owner of a sole proprietorship. Likewise, Chapter 11 can be filed by an individual who does not qualify for Chapter 13 bankruptcy because they have too much debt to be eligible. In addition, Chapter 7 can be filed by individuals or businesses, though the end results will differ.

Contact Our West Palm Beach Bankruptcy Attorneys Today

When businesses or individuals consider bankruptcy, it can be difficult to understand the different options available and how eligibility works — especially when you are a small business owner who is also dealing with some personal debt or a personal guarantee on a business loan. To find out more about bankruptcy options for your business or for yourself as an individual filer, you should get in touch with an experienced West Palm Beach bankruptcy lawyer at Kelley Kaplan Delaney & Eller, PLLC. We have years of experience representing businesses and individuals alike in bankruptcy cases, and we can speak with you today about your options. Contact us to learn more about how we can assist you.

Source:

law.cornell.edu/uscode/text/11