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How does Chapter 13 work for a small business?

On Behalf of | Apr 24, 2015 | Chapter 13

The ability to run a small business is a dream come true for many people, and can be a rewarding experience. Unfortunately, many small business owners in Eugene are experiencing financial difficulties due to today’s tough economy. It can be heartbreaking if you’re thinking about shutting down your beloved company because you aren’t able to pay the bills. Fortunately, there are some options that you can consider before closing the doors for good on your small business.

Chapter 13 bankruptcy is one of these options. Usually, Chapter 13 is reserved for individuals or families. It can, however, be used by the owner of a small business under certain circumstances, states the U.S. Small Business Administration. For example, if you run a business in your home and your business expenses are tied in with your personal expenses, Chapter 13 might help. The same is true if you operate a business in town, but have used your own funds and loans to start up and run the company.

Your business would not be eligible for Chapter 13 bankruptcy if it is a corporation or limited liability company; it must be a sole proprietorship.

Under Chapter 13 bankruptcy, you would be given the option to restructure your debts to repay creditors over a time period approved by the court. If you also include your personal debts in the Chapter 13 filing, you may be able to avoid losing assets such as your home, as opposed to Chapter 7 bankruptcy.

Financial setbacks in a small business can be stressful and sometimes devastating, but they are not always permanent. Some forms of debt relief, such as Chapter 13 bankruptcy, can give you the time to rebuild your business without losing it.


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The Law Office of Kim Covington is a debt relief agency, and I have helped families, individuals and small businesses, file for bankruptcy relief under the U.S. Bankruptcy Code, for over 22 years.