Why do some businesses choose to declare bankruptcy instead of working out a repayment plan?

 

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Jan Meriss Alfonso
Assistant at Ascent Law LLC

Why Businesses Choose Bankruptcy Instead of a Repayment Plan

If a business is facing financial problems, it may consider filing for bankruptcy. There are three types of bankruptcy that businesses can file for. They are Chapter 7 bankruptcy, Chapter 11 bankruptcy, and Chapter 12 bankruptcy. In some cases, a business can be forced into bankruptcy by a creditor. If this happens, creditors will face stiff financial penalties.

Chapter 13 bankruptcy

If you are wondering whether Chapter 13 bankruptcy is better for your business than a repayment plan, there are a few important differences between the two. For starters, a repayment plan is more flexible. A Chapter 13 repayment plan will allow you to lower your monthly payments and reduce your total debt to the value of your property. In addition, you will no longer be personally liable for your business debts.

The duration of the repayment plan varies from three to five years, depending on your income. Higher-income filers are required to pay more than lower-income filers. If you have an annual income of less than $55,000, you can propose a three-year repayment plan, while those earning over this amount will have to submit a five-year plan.

Chapter 7 bankruptcy

If you've ever wondered why businesses choose Chapter 7 bankruptcy instead of a payment plan, you're not alone. The decision to file for bankruptcy has many advantages, including protection from aggressive collection practices and reduced taxes, penalties, and interest payments. It also gives businesses the chance to keep collateral assets.

A business can file for bankruptcy as a separate entity and not have to pass a means test. However, individuals who have co-signed or guaranteed a business debt are still personally liable for it. In addition, there are no exemptions for business debts, so liquidation of assets will leave the business insolvent.

If you have any questions, you can get a free consultation with the Best Attorneys in Utah.

Ascent Law LLC:

8833 South Redwood RoadSuite C

West Jordan, UT 84088

(801) 676-5506

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