Small businesses in financial distress often consult bankruptcy lawyers in Largo to learn about various restructuring options.
The lawyers stress upon the need to file for Chapter 11 or Chapter 13 if they want to stay in business.
We must bear in mind that both Chapter 11 and Chapter 13 have several similar features and allow debtors to stay in business and put forward plans to streamline their finances.
So let us try to understand how each of these Chapters, 11 and 13, can help businesses.
Chapter 11 Bankruptcy
Several large corporations have made headlines by filing for Chapter 11. These include well-known names like K-Mart, Lehman Brothers, and General Motors.
For those who are not aware, Lehman Brothers’ filing for bankruptcy is the largest filing for Chapter 11 in history. The company had assets and liabilities in excess of $600 billion.
Most companies file Chapter 11 where their chief business is located. But a business owner must keep in mind that they cannot file under Chapter 11 if during the foregoing 180 days a previous bankruptcy petition was dismissed due to any reason.
As in Chapter 7, a Chapter 11 instance commences with filing of the petition, Section 341 meeting and the Schedules and Statement of Financial Affairs.
A bankruptcy law firm in Maryland however warns that a Chapter 11 process can be very long drawn and expensive. But he adds, “A great comeback plan in any case is essential, because a second chance can cost you dear”.
While there are several important elements in Chapter 11, the most significant is “the automatic stay”.
It stops all open litigations against the debtor and all efforts to collect debts prior to the petition.
But businesses also know that any creditor can request a “relief”, which effectively means that a creditor can continue to go ahead with any pre-petition claims.
Statistically, all companies that file for Chapter 11 may not survive, but a business that is facing a financial crisis must meet a bankruptcy law firm in Maryland before it is too late.
Chapter 13 Eligibility
A company or a business cannot file for Chapter 13 in the name of the business. However, if you own a company you can file for Chapter 13 as an individual.
There are certain conditions though.
You must possess sufficient disposable income.
Bankruptcy lawyers in Largo stress that to qualify for Chapter 13 you must prove to the court that you have adequate income after allowing for expenses and payments for secured debts.
Debtors are allowed to make use of the following sources to fund a Chapter 13 plan.
Regular wages
Social security benefits
Welfare payments
Royalties and rental income
Pension benefits
Money received from selling property
Another condition is that you must be updated with your income tax filings.
According to bankruptcy lawyers Largo if you are unable to prove your tax returns for the four tax years prior to bankruptcy filing date, the courts can dismiss the case.