If you are a small business owner, Chapter 13 bankruptcy can restructure your debts in a way that allows you to keep your business up and running. How? The Chapter 13 bankruptcy is known as reorganization bankruptcy, and this is because this bankruptcy creates a new repayment plan. Through this plan, you pay off some or all of your debts in about three to five years. You have to repay all your priority debts (tax debt, family support payments, etc.) through this plan, and depending on your income, you will have to pay off a certain portion of other debts.

Can your small business enter Chapter 13 bankruptcy?

Probably not. Chapter 11 bankruptcy is similar reorganization process available to many businesses, but Chapter 13 bankruptcy is solely for individuals. That being said, certain businesses cannot be distinguished from its individual owners, such as:

• Sole proprietorships
• Some partnerships

These forms of business will essentially derive the exact same benefits as the individual owner who files for Chapter 13 bankruptcy. But even if you have another business structure, you might get to include business debts when you file for Chapter 13.

When are business debts included in Chapter 13 bankruptcy?

If you file for this type of bankruptcy, you have to put down the debts you are on the hook for, and this would include business debts that you yourself are liable for paying off. Sole proprietors can clearly include all business debts then, as these business debts are also personal debts. So what about other business structures, such as LLCs, or corporations? Those debts can't be included in your Chapter 13 plan unless you are personally accountable for them, such as if you cosigned a business debt.

How can Chapter 13 bankruptcy keep my business open?

Some potentially business-saving advantages of Chapter 13 bankruptcy include:

• Unsecured debts (e.g. credit card debt) could be discharged
• Priority debts get repaid
• Secured debts (e.g. car loans) could be decreased
• You don't have to liquidate your business assets

Not only could you hold on to your property (unlike in Chapter 7), Chapter 13 bankruptcy can allow your business to move forward with a clean slate. Call a bankruptcy lawyer if you would like to learn more!