With your start-up business, you made a go of it as a sole proprietor. For the first 18 months, matters went well as you expanded your client list, added more employees and looked to the future. Then the COVID-19 pandemic struck. The work dried up because your pipeline of clients dried up. Your clients adhered to strict limits on spending, and many politely put your business on the sidelines.
Timing is an important factor in starting a business, but who knew that a global pandemic would strike and place certain businesses to a near-grinding halt. You have options. Filing for Chapter 13 bankruptcy remains a realistic option. As a sole proprietor, you can explore this bankruptcy route, which represents a way to reorganize your debt.
Reorganize and avoid liquidation
Corporations and partnerships are not allowed to file for Chapter 13 bankruptcy to reorganize debt as they attempt to remain in operation. Instead, they must file for Chapter 11. When it comes to business bankruptcy, Chapter 13 is geared exclusively for companies with sole proprietors. This is a crucial way to avoid liquidation, while remaining in business. This way, you can ponder your next steps and the changes you implement, while paying off debt.
The typical scenario in Chapter 13 bankruptcy involves a debtor who proposes a monthly plan for debt repayment. Those payments usually take place for a period of three to five years. Remember that a Chapter 13 bankruptcy plan only can last up to 60 months.
A business blip stemming from the effects of COVID-19 can happen at any time and during any economic period. You devoted a great amount of energy, time and capital into your business. That is why you do not want to let it dissipate into thin air. Chapter 13 bankruptcy is an effective step toward helping your business survive and move on to its next chapter.