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Chapter 13 for Ohio Business Owners
Although the word “bankruptcy” often conjures up images of a shuttered business, the truth is that many Ohio business owners use bankruptcy to stay afloat. Restructuring debts can often keep businesses running while still paying creditors. In other words, they can keep their livelihoods and put a stop to the endless calls from debt collectors.
It is also essential to understand that filing for Chapter 13 bankruptcy can be complicated. For a busy business owner, the legal hurdles and paperwork can be overwhelming. The good news is that an Ohio Chapter 13 bankruptcy lawyer can help you through every step of the process.
Understanding Chapter 13 Bankruptcy
Chapter 13 bankruptcy is sometimes called the “wage earner’s plan.” That is because this form of bankruptcy allows you to repay all or part of your debts with the income you are currently earning. In other words, it can be a perfect option for business owners who would like to stay open.
Eligibility for Chapter 13
To be eligible for Chapter 13 bankruptcy, your debts cannot exceed:
- Unsecured debts of $419,275
- Secured debts of $1,257.850
Also, you have to receive approved credit counseling during the six months before filing.
The Chapter 13 Process for Ohio Business Owners
Here is a general outline of the Chapter 13 process for business owners:
- File a petition with the Ohio bankruptcy court that serves your area
- File paperwork detailing your assets and liabilities, income and expenses, contracts, leases, and financial affairs
- Submit proof that you received approved credit counseling within the previous 180 days
- Pay your filing fees
- Complete the official bankruptcy forms. These include a list of your creditors and debts, your property, and your monthly living expenses
- Creditors are barred from taking further action
If this sounds like a lot to take on, it may be wise to consult an attorney for help filing for bankruptcy.
Chapter 13 vs. Chapter 11: Which Is Better for Business Owners?
Business owners often file for Chapter 13 or Chapter 11 bankruptcy. But which is better for business owners? An attorney can help you understand the pros and cons of your situation. For general information on the two types, see below:
The biggest downside of Chapter 13 bankruptcy for business owners is that it can only apply to sole proprietors. You have to file as an individual rather than as a business.
If you are a sole proprietor, then Chapter 13 will likely be the better choice over Chapter 11. Here are a few reasons why:
- You may be able to discharge more types of debt.
- Courts tend to approve Chapter 13 plans more quickly. That means you can reach your fresh start faster.
- Filing for Chapter 13 is less expensive than filing for Chapter 11. Chapter 13 requires $313 in filing fees. Chapter 11 requires more than $1,738.
Chapter 11 bankruptcy may be the right option for owners of businesses that are not sole proprietorships. Debt limits are higher for Chapter 11, meaning you can file for this type of bankruptcy if your business is in significant debt.
Can You Keep Your Business After Chapter 13 in Ohio?
In Ohio, you can keep your business after Chapter 13 bankruptcy. As long as you stick with the plan the bankruptcy court approved and made all your payments, your business can keep running.
Does Personal Debt Affect Chapter 13 Bankruptcy?
Because Chapter 13 bankruptcy for businesses only applies to sole proprietors filing as individuals, personal debt and business debt are the same. So, even if you have debts that are separate from your business, they can affect your ability to file Chapter 13 if they exceed the debt limits when added to your business debts.
Worried About Your Business? Speak with LHA Today
Ohio business owners work hard. When times get tough, the idea of losing the business you have worked so hard to build can be terrifying. But Chapter 13 can offer hope in a dark time.
Working with a skilled Ohio Chapter 13 attorney can help you avoid mistakes and understand the best way forward for you and your business.