A court-appointed trustee takes
control of all assets, liquidates them and distributes funds
to creditors
Who
should file?
The owner of a business that no longer wants to stay in
business or is no longer viable
The owner of a business that has a large number of unsecured
debts, and does not have a large number of non-dischargeable
debts, such as federal taxes
Chapter
11
Reorganization
Available to:
All types of business
Filing fee:
$800
What happens?
Sole proprietors can claim exemptions
Reorganization plan must be approved by the court and
creditors
Creditors can create obstacles to successful reorganization
There is no court appointed trustee; the business acts
as its own trustee
Who should
file?
The owner of a business that
does not qualify for a Chapter 13 bankruptcy who wants to continue
operating and has a business with an excellent chance of becoming
financially viable if it gets relief from its debts
Chapter
12
Family Farmer Bankruptcy
Available
to:
Any farmer for whom
more than one-half of gross income comes from farming. Eighty
percent of the debt must be from specific farming operations
Filing
fee:
$200
What
happens?
Chapter 12 bankruptcy is modeled closely after Chapter
13
A trustee is appointed, but the farmer usually keeps the
farm while forming a plan
Normally proceeds more quickly than a Chapter 11 and may
be less expensive
Who
should file?
A farmer whose debt
does not exceed $1,500,000
Chapter
13
Reorganization
Available to:
Sole proprietors who do not
owe more than $100,000 in unsecured debts and $350,000 in secured
debts
Filing fee:
$160
What happens?
Reorganization plan must be approved by the court
Plan can exempt assets from the bankruptcy
Trustee does not control assets but receives and distributes
business owner's payments to creditors
IRS cannot seize property while in Chapter 13, and debtor
has up to five years to pay back taxes
Remaining debts after period of bankruptcy (three to five
years) are wiped out
Who
should file?
A sole proprietor who wants
to continue operating, and the debt involved does not exceed
the limitations for this type of bankruptcy
Sources: The Small Business Survival
Kit, by John Ventura, and the University of Minnesota
Extension Service
