When Michigan business owners fall on tough times, they may fear losing the business they’ve worked so hard to build. They may not be aware that there is a chance they could save their business through filing for bankruptcy. However, not just any bankruptcy filing will fit the bill and there are other requirements to be met. Still, it may be the best option for a business owner to file for Chapter 13 bankruptcy as a means of keeping the business going.
Although the intention of a Chapter 13 bankruptcy may be to save a business, the person filing will have to file for personal bankruptcy. Chapter 13 is not technically available for use by a business entity – that would involve a Chapter 11 filing. This type of bankruptcy filing won’t reduce or get rid of business debts, but it may help a person free up expenses that can cover business costs. The business owner also must not exceed a certain income level and have the ability to follow through on an approved payment plan.
The debts owed are divided into different types that dictate how they are handled by bankruptcy. Priority debts include owed taxes and bankruptcy filing costs while secured debts have collateral attached, such as a car or house. Neither of these debts can typically be reduced, but the payor may get an extension on the deadline for payment in full. As for unsecured debts like credit card bills, bankruptcy may reduce the amount owed as well as give the payor more time to pay.
Whatever choice a person makes, it is possible to save a business by filing for Chapter 13 bankruptcy. The best thing that Michigan business owners can do is consult a bankruptcy attorney for advice. An attorney will have much more knowledge surrounding this subject than is outlined here and even think of some other options that may suit a business owner’s situation better.