Alabama business owners considering bankruptcy should first understand that each situation that involves a bankruptcy is different. There will be times when the best thing for business owners to do is to let go of the assets they are trying to keep. Business owners who find themselves in this situation may benefit from a Chapter 7 bankruptcy. The process for these bankruptcies includes a sell-off of assets. The debtor then pays as much of the debt as possible with the proceeds. The business does not exist anymore, but the owner can walk away clean and start anew.
Individuals that choose the Chapter 13 bankruptcy route are not required to sell anything. This process allows business owners to restructure the debt they owe. In many cases, this restructuring provides the owner with more time to pay off the debts they owe and allows them to reach a point of solvency once more. Business owners must understand, however, that the business entity itself is not eligible for Chapter 13 bankruptcy. Owners are only allowed to use this bankruptcy method in an individual capacity.
The first part of the Chapter 13 process is to qualify for the protections. The requirements are an income lower than the median for the state in which they live and a debt-to-income ratio that makes paying off the obligations unlikely. Once qualified, an appointed trusty will evaluate the income and debt possessed by the business owner before devising a repayment plan they can complete. The term of the payment plan is either three or five years.
Chapter 13 bankruptcies can help business owners by providing them with relief with their finances. The owner will only need enough money each month to pay what is necessary to refill his or her repayment plan obligations. Because of this, the owner will not need to take as much money out of their business. The result is a business with more money to survive through the lean times that all business owners must endure from time to time.
Filing for bankruptcy involves a complicated legal process that can become difficult for some people to navigate on their own. Individuals who possess questions regarding the bankruptcy process may find the answers they need by speaking with a lawyer.