If you are looking to retain property while restructuring existing debt, it may be in your best interest to file for Chapter 13 bankruptcy. Although businesses cannot file for a reorganization bankruptcy, business owners in North Carolina and elsewhere may be able to do so.
Do you qualify for Chapter 13 bankruptcy?
In addition to being an individual debtor, you must also have sufficient income to make monthly plan payments. Assuming that you are eligible to file for Chapter 13 protection, you will make payments to creditors over a period of three or five years.
The potential benefits of a Chapter 13 bankruptcy
Typically, filing for bankruptcy allows you to reduce your monthly expenses, which can mean that more money stays inside of your business. Although your personal credit score may take a hit after seeking protection from creditors, your company’s credit score will generally remain intact. Ultimately, this may provide you with the flexibility needed to keep your business afloat even if you can’t directly file for relief from existing corporate debts.
Reorganizing your debt helps you regain control over your finances
Reorganizing your debts may give you a greater chance of retaining control of both your personal and corporate assets. Your CPA will likely be able to provide insight into whether filing for bankruptcy is right for you and the impact that doing so might have on your company.
A Chapter 13 bankruptcy may make it easier to get out of debt without having to relinquish personal assets such as a home or car. In some cases, reducing or eliminating personal debt balances can make it easier to keep your company from shutting down. An attorney may be able to talk more about the potential benefits of bankruptcy such as obtaining an automatic stay of creditor collection activities.