Chapter 13 bankruptcy may be able to help you reorganize your debts and save your firm, but only in limited circumstances. Keep reading to learn who is eligible for Chapter 13 bankruptcy and whether the filing will benefit you.
To find out which legal path is best for your situation, you should speak with an experienced Hagerstown, MD bankruptcy attorney.
The Process of Chapter 13 Bankruptcy
By declaring Chapter 13 bankruptcy, you can keep your possessions and reorganize your debts while repaying all or part of your debts in a repayment plan. A Chapter 13 repayment plan typically lasts three to five years. An appointed trustee in your bankruptcy case charges you a monthly fee, and you will be compensated for your debts according to your bankruptcy plan.
Your repayment amounts will be determined by your income, expenses, and types of debt. The more money you earn, the more you’ll have to pay. Certain debts (often called priority debts) must be paid in full through your plan, regardless of income. Examples include tax debts and the cost of domestic support.
You may not be eligible to reorganize your debts through Chapter 13 bankruptcy if you can’t show that you have enough income to repay these bills in full and other mandatory payments. Upon completing the repayment plan, you will become debt-free.
How Chapter 13 Bankruptcy Benefits a Sole Proprietor
Small businesses can remain operational under Chapter 13 bankruptcy.
Filers of bankruptcy can protect (exempt) certain items they need for their house and work, which is beneficial since most sole proprietors need equipment. As a perk of Chapter 13 bankruptcy, you can maintain the exempt and nonexempt property.
Exempt business property
Business-related items are exempt from the “tools of the trade” exemption up to a certain amount. Most exemption regulations allow you to keep any property you like, as long as it is reasonably necessary for your job.
Non-exempt business property
You are allowed to keep non-exempt assets when filing for Chapter 13 bankruptcy (in contrast to a Chapter 7 case in which the trustee sells your assets).
Nevertheless, be aware that you’ll have to pay for the value of any nonexempt assets in your plan, which can be very costly if your company owns expensive equipment, stock, and fixtures.
To figure out what you can keep and what you’ll have to pay for, consult the bankruptcy exemption statutes in your state.
