Many people face financial difficulties more than once in their lives. However, if you own a business that is financially struggling, it affects not only the business itself as well as your personal finances.
Businesses fail for many reasons; however, the primary reason is cash flow problems. So, what do you do if you’re facing both professional and personal financial challenges?
You may find yourself considering filing bankruptcy. But which chapter of bankruptcy should you consider? Keep reading to learn more about Chapter 11 and Chapter 13 bankruptcy.
What is a Chapter 11 bankruptcy?
Chapter 11 bankruptcy is a type of bankruptcy for small businesses. When a company files for Chapter 11, the owners can reorganize their debt, allowing them to pay their obligations off over time.
A Chapter 11 bankruptcy may take anywhere from six months to two years to complete. However, your bankruptcy won’t be discharged until you complete your debt repayment plan.
What are the pros of a Chapter 11 bankruptcy?
Under a Chapter 11 bankruptcy, the business can continue to run while paying back its debts while avoiding liquidation of assets and property. Additionally, when going through a Chapter 11 bankruptcy, you avoid lawsuits, liens, and foreclosures.
What are the cons of a Chapter 11 bankruptcy?
Here are some cons of filing a Chapter 11 bankruptcy that small business owners should consider:
- The process is often expensive and lengthy
- Business owners will be paying off restructured debt for some time
- The debt reorganization plan must be approved by the court
If you’re considering Chapter 11 bankruptcy, consider seeking advice from a skilled bankruptcy attorney to help you navigate these obstacles.
What is a Chapter 13 bankruptcy?
A Chapter 13 bankruptcy functions similarly to a Chapter 11; however, Chapter 13 bankruptcies are only for individuals, not businesses. When an individual files for Chapter 13, they can protect their assets (such as their home and car) while negotiating a three to five-year payback of debts.
A Chapter 13 bankruptcy may take approximately three months to complete. However, your bankruptcy won’t be discharged until you complete the three to five-year plan.
What are the pros of a Chapter 13 bankruptcy?
Under a Chapter 13 bankruptcy, individuals can keep their homes and cars, even if they’re behind on their mortgage and loan payments. Through this type of bankruptcy, individuals can catch up on these payments over time.
Additionally, the Chapter 13 trustee will pay all creditors on the individual’s behalf, taking some pressure and stress on the individual themself.
Finally, Chapter 13 bankruptcies only stay on your credit report whereas a Chapter 7 bankruptcy stays on your credit report for 10 years.
What are the cons of a Chapter 13 bankruptcy?
Here are some cons of filing a Chapter 13 bankruptcy that individuals should consider:
- Your credit will be negatively impacted
- You may have trouble qualifying for new credit since your credit score has been negatively impacted
- You can’t take out new credit without the court’s permission
- If you miss payments during the Chapter 13 bankruptcy, the court may dismiss your case, putting you back into a stressful situation
If you’re considering Chapter 13 bankruptcy, consider seeking advice from an experienced bankruptcy attorney to help you navigate these obstacles.
Hiring an Augusta, Georgia Bankruptcy Lawyer
Finances – and debt management – can be overwhelming and stressful. Avoid the stress and enlist the help of a bankruptcy attorney in Augusta, GA. The Law Firm of Seymour and Associates, P.C. can help you determine if you should file Chapter 11 or Chapter 13 bankruptcy. Contact our team of attorneys today to learn more about your bankruptcy options.