Bankruptcy takes place when an individual or a corporation legally declares that it is unable to pay all the debts that it owes to its creditors. Chapter 13 business bankruptcy is a more specific type of bankruptcy. It occurs when a business is unable to pay its debts to creditors.
Chapter 13 Process
When a business declares chapter 13 bankruptcy, the president, board of directors or other responsible party becomes known as the debtor. In order for them to file, they must meet the clearly spelled-out chapter 13 bankruptcy requirements.
Chapter 13 Bankruptcy Rules
Following chapter 13 bankruptcy rules, the debtor then proposes a payment plan, which is mailed to all of the creditors that meets two tests. The first of these is called the “best interest of creditors test.” That is, does the proposal give creditors at minimum as much claim as if the debtor had filed chapter 7 bankruptcy. Second, the “best efforts tests” essentially says that debtors must pay back creditors an amount that is equal to their monthly disposable income.
Discharging Debt
Once the payment plan is agreed upon, the debtor must meet certain obligations. For instance, he/she must not exceed the chapter 13 debt limit, and he/she cannot take on significant new debt without the approval of a presiding judge. When a business has paid off all of its debts, this is called a discharge. The discharge protects the debtor from creditors trying to seek more money that was owed beforehand, and it remains on the debtor’s record for the next ten years.
Chapter 13 Bankruptcy Lawyer
If you are running a business that is accumulating more and more debt that you are unable to pay, you may be a candidate for chapter 13 bankruptcy. To learn more about the process and about your legal rights therein, it is strongly advisable to hire a bankruptcy lawyer. They can look at the particular facts of your case, and help you to determine if chapter 13 is a legitimate recourse for you. They can also counsel you on paying off chapter 13 bad debts, and putting together a payment plan that will equip you to meet your obligations towards your creditors.
