A previous post on this blog talked about how bankruptcy may be an important and even necessary step for Florida businessowners to take should they run into financial hardships.
This post specifically talked about how Chapter 7 bankruptcy, in which a businessowner will surrender non-exempt property in exchange for a discharge of debts, may be the right move after a business fails.
However, in some situations, the owner of a business experiencing some distress may be able to use a Chapter 13 bankruptcy both to protect their own finances and give their business some breathing room in order to get back onto solid financial footing.
Generally speaking, a Chapter 13 bankruptcy can assist a person who owns and operates a sole proprietorship. In a sole proprietorship, an individual runs a business in their own individual name, even though they may also do business under a trade name.
The major feature of a sole proprietorship is that the proprietor is responsible for all of their business debts to the same extent they are responsible for their house loan or any other debt.
Although a sole proprietorship has its disadvantages, one advantage is that business debts, like personal debts, are subject to discharge in an individual bankruptcy. This may make little difference should one file a Chapter 7, as doing so would usually entail having to sell off many if not all business assets in order to pay debts.
However, a sole proprietor may also elect to file a Chapter 13 and submit a repayment plan to the court which covers both their business and personal debts. If the individual is successful in following the plan, they can protect their own assets as well as those of the business, thereby giving the business a new lease on life.