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Bankruptcy Chapter 11 and 13

Under Chapter 11 Business Bankruptcy is a legal process by which a business may declare bankruptcy but continue to operate under the direction of a court-appointed trustee. This process is called "reorganization," because the trustee reorganizes the business to be more efficient and to be able to pay the creditors of the business. The bankruptcy court may also exempt the business from paying all or part of its debts. Chapter 11 bankruptcy is usually sought and granted in the case where the value of the business is greater than the sum of its assets; in other words, the business has a significant amount of goodwill as a "going concern" which would be lost if the business were sold or liquidated. In many cases, a business may re-emerge from Chapter 11 and continue to operate normally. In other cases, the reorganized business can be sold after some period of time.

Chapter 13 Bankruptcy is an individual debt adjustment type of bankruptcy which is available to individuals who have a regular income and "as long as the individual's unsecured debts are less than $336,900 and secured debts are less than $1,010,650". In the case of married individuals, one or both spouses may file the petition. Chapter 13 bankruptcy is available to self-employed individuals and those with unincorporated businesses. Partnerships and corporations are not eligible to file Chapter 13 bankruptcy, although they may file Chapter 7 Liquidation or Chapter 11 Reorganization. Under Chapter 13 bankruptcy, the debtor files a plan to repay all or part of his/her debts, over a three to five year period. The length of time is determined by the monthly income of the debtor. During this time, creditors may not start or continue collection efforts against the debtor.

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