Florida business owners burdened by substantial financial debt may believe that filing for Chapter 11 bankruptcy is the only course to take to save their businesses. While it is true that many businesses in the Sunshine State qualify for Chapter 11, some business owners may also be able to utilize Chapter 13 bankruptcy. It depends on whether you are personally liable for your own business debt or not.

Per Chron.com, businesses who need to reorganize their debts frequently file Chapter 11. Many business owners hope that by using Chapter 11, they can keep their businesses running while they reorganize their business debt through a plan that the bankruptcy court will approve. If successful, the business gets out from the cloud of debt by repaying some debts and likely discharging others. However, a business that cannot reorganize its debts could end up going into Chapter 7 liquidation.

A business such as an LLC is not eligible for Chapter 13 bankruptcy. Chapter 13 is intended for individual debtors. However, an LLC or other incorporated business is a legal entity separate from the people who own the business. The liability of the owners is limited to whatever they have invested in the business. Business owners in this situation are limited to filing for Chapter 11.

However, a person who is a sole proprietor is not considered legally different from the business the person runs. For this reason, business debt is the same as personal debt, so a sole proprietor is personally liable for business debts and could face financial ruin if the debts are not repaid. This means Chapter 13 bankruptcy, which is available to individuals, can be used by sole proprietors as well.

A sole proprietor can still file for Chapter 11 if desired. However, Chapter 11 is generally used by bigger business entities with more complicated debt and income problems. Additionally, Chapter 11 may be more expensive. People who are personally liable for their own business debt may find, if their situations are simple enough, that Chapter 13 is an easier or more efficient course of action.

Because the needs of Florida residents with debt issues vary from person to person, do not interpret this article as legal counsel. It is only intended to provide general information on Chapter 13 bankruptcy.