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Small Business Bankruptcy Attorneys in Tucson

Small Business Reorganization Act

When business owners are facing bankruptcy, the Small Business Reorganization Act presents them with an option for dealing with debts. Small businesses have several options to choose from when it comes to filing bankruptcy, but the Small Business Reorganization Act limits how much they must repay creditors in full. If you are considering using this Act, you should know how it works and what benefits and drawbacks to expect.

What is the Small Business Reorganization Act?

The Small Business Reorganization Act allows business owners to request that they be exempted from paying back all of their creditors in full. Under this Act, large businesses are not eligible for Chapter 13 bankruptcy protection. Instead, the Small Business Reorganization Act only applies to businesses with fewer than 10 employees or those who have less than $1 million in assets and $2 million in liabilities.


Chapter 13 bankruptcy protection is available under this Act for businesses of any size; however, Chapter 11 bankruptcy is not an option. Under Chapter 11, a business owner might be able to continue operating the business while working out a debt repayment schedule.


How Chapter 13 protection under the Small Business Reorganization Act works

A business owner who files for Chapter 13 bankruptcy protection must develop a three-year repayment plan that will primarily be used to repay creditors in full. The amount of money owed to each creditor may vary greatly, and all creditors must agree to the repayment terms before it is finalized. In order to receive this bankruptcy protection, business owners must have a steady income stream with which they can pay back creditors over time.

What happens on the date of filing


On the date of filing for Chapter 13 bankruptcy protection, nothing will happen immediately. The court will not make a decision on the request for three years; however, you may be able to get relief from certain debts such as property taxes and child support payments. While your creditors cannot contact you until the court makes its final ruling on this matter, they can still monitor your income and assets during that time.

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