What is Chapter 13 bankruptcy, and what does a business need to know?

Chapter 13 is a type of bankruptcy that allows for the reorganization of debts for individuals and small businesses. Corporations cannot file for Chapter 13 bankruptcy relief. In most cases, individuals and couples with some source of regular income are allowed to keep their property and pay a percentage of their debts over time. The most important benefit is that it often protects a home from foreclosure or a car from repossession. In addition, small business owners are allowed to operate and reorganize their debts without having to close their business.

Businesses can also utilize the benefits of a Chapter 13 bankruptcy. The business may not want to stop operations and file for Chapter 7 bankruptcy relief. A Chapter 13 reorganization can give the business the benefits of the automatic stay while it seeks to reorganize its debts. Leases can be assumed or rejected. Tax claims can be paid over time without further interest accruing and penalties may be discharged. General trade creditors can be paid a portion of what is owed. Chapter 13 provides an efficient and cost-effective framework for businesses.

Contact us at (925) 472-8000 for more information or if you have any questions.


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