How to File Chapter 13 as a Business

Chapter 13 bankruptcy is one way to restructure your business debt and temporarily stop creditors from hassling you or forcing the courts to sell your assets. You can't file for Chapter 13 directly as a business, but if you own one, you can include it in your personal-bankruptcy declaration.

Difficulty: Moderate

Instructions

1. Meet with your bankruptcy lawyers to find out which business debts you can file under Chapter 13. If you do not own the entire business yourself (partnerships are excluded), you must be able to prove that you are directly responsible for the assets you are claiming on your bankruptcy petition.

2. Calculate your total secured and unsecured debt to be sure that you are eligible to file Chapter 13. The upper limit of both amounts changes yearly to reflect inflation and changes in the cost of living, so check with the bankruptcy court or your lawyer for the exact amounts.

3. Gather your recent pay stubs and bills and make photocopies of them. In most cases of Chapter 13, you'll need to prove that your net earned income is greater than your monthly living expenses. If the bankruptcy court rejects your application on account of your income, your alternatives could be to file as Chapter 7 or 11, depending on the health of your business.

4. Submit your petition for bankruptcy with the required supporting materials. Pay the required processing fees for your Chapter 13 application, and meet with a credit and debt counselor who is approved by the US Trustee's office. If your regular lawyer or accountant isn't an approved counselor, check the office's list at USDOJ.gov (see Resources below).

5. Create a 3 to 5 year payback plan with help from your credit counselors and lawyers. Submit this plan, and wait for the court's approval, remembering that your creditors cannot collect payments during the interim. Remember that some secured loans, like those for business vehicles, may not be eligible for repayment changes under Chapter 13.

Tips & Warnings

• Some store-issued credit cards allow the seller to retain the rights to the goods purchased if the items are financed by the store. Prepare for the fact that these items may be reclaimable by the seller if you declare Chapter 13.
• You can refile your Chapter 13 claim as an individual with business assets 2 years after your first petition, but you must wait 4 years after a Chapter 7 bankruptcy.

Resources

• US Trustee-approved credit and debt counselors