What Factors Determine a Business’s Eligibility for Certain Types of Bankruptcy?

When a business is considering a bankruptcy filing, it is essential to work with a business bankruptcy lawyer in South Florida who can assist the business owners in determining eligibility for particular types of bankruptcy. There are different factors that go into a business’s eligibility for particular types of bankruptcy, including the structure of the business, the nature of the business, and the amount of debt the business has when filing for bankruptcy. Our West Palm Beach business bankruptcy attorneys can discuss these factors with you in more detail below, and we can speak with you today about the particulars of your business to determine your company’s eligibility for bankruptcy in Florida.

Structure of the Business

The structure of your business can, in limited circumstances, determine your business’s eligibility for particular bankruptcy types. More specifically, whether or not your business is structured as a sole proprietorship or has another business structure will determine whether your business can file for Chapter 13 bankruptcy. This is a type of consumer or personal bankruptcy, to be clear. However, a sole proprietorship — unlike other business structures — is not separate and distinct from the business owner. In a sole proprietorship, the business owner and the business are the same entity for bankruptcy purposes. Accordingly, a sole proprietorship can file for Chapter 13 bankruptcy, which can cost the business less and can allow the business owner to avoid many of the complexities of Chapter 11 or Subchapter V.

Amount of Debt Accrued by the Business

The amount of debt your business has can determine eligibility for Chapter 13 bankruptcy (if your business is a sole proprietorship, as discussed above) and for Subchapter V.

For a Chapter 13 bankruptcy, a sole proprietorship (the business debts plus the debts of the owner) cannot exceed $1,580,125 in secured debt and $526,700 in unsecured debt.

For a Subchapter V bankruptcy, the total business debt is limited to a threshold of $3,024,725 unless Congress ultimately decides to raise that ceiling (which is an issue that remains in discussion).

Nature of the Business

Finally, the nature of the business can determine eligibility for certain bankruptcies, specifically Chapter 12. This is a type of business reorganization bankruptcy that is limited to family farmers and fishermen. In other words, the business must be a type of family farm or business centered around fishing, which can sometimes be relevant to debtors in South Florida.

Contact a West Palm Beach Bankruptcy Attorney for Assistance

There are different types of bankruptcies that a business can be eligible to file for, including various types of reorganization bankruptcy. Depending on the structure of your business, you may also be eligible for certain types of bankruptcy that are designed for consumers, such as Chapter 13 bankruptcy if you have a sole proprietorship, as we explained above. The nature of your business can also determine eligibility for certain kinds of bankruptcy, such as Chapter 12, as well as the amount of business debt accrued. To find out more, and to begin working on your bankruptcy petition, you should contact one of the experienced West Palm Beach bankruptcy lawyers at Kelley Kaplan Delaney & Eller, PLLC. We are here to begin working with you on your business reorganization bankruptcy today.

Sources:

law.cornell.edu/uscode/text/11

irs.gov/businesses/small-businesses-self-employed/business-structures