Difference Between Chapter 7 & Chapter 13 Bankruptcy

Chapter 7

Chapter 13

Wage Garnishment


Creditor Harassment

Small Business Bankruptcy


When you started your small business, you likely anticipated a long road of hard work before your enterprise would become profitable. The hope, of course, was to eventually emerge from these beginning stages and achieve exponential growth—or, at the very least, financial independence.

If you find yourself facing unmanageable financial adversity year after year, you may be unsure of your next move. Do you continue as you are, hoping the tide will eventually turn? Or do you find other ways to obtain financial relief? Is there a future for your business if it isn’t profitable due to overwhelming debt?

At The Southard Law Firm, L.L.C., we may be able to help you take advantage of the U.S. Bankruptcy Code. As a business owner, you have several options, and we can closely analyze your situation to determine whether bankruptcy is right for you, and, if so, which chapter will accomplish your goals.

o learn more about your options, contact our small business bankruptcy lawyer in Cincinnati at today.


Types of Bankruptcy for Small Businesses

Deciding which chapter of bankruptcy to file can be a significant challenge—especially without qualified legal counsel. When you bring your case to The Southard Law Firm, L.L.C., our attorney can provide insight and predictions based on your situation and business type.

In the meantime, here is a brief overview of each chapter of bankruptcy you may file as a small business owner. In every case, bankruptcy will trigger an automatic stay, which halts all collection actions (e.g. foreclosure, calls and letters, bank levies, etc.) for the duration of your bankruptcy process.

Chapter 7

Also known as liquidation bankruptcy, Chapter 7 is for business owners who need to free themselves from the debt and other financial obligations of their struggling business. The trustee will sell your non-exempt assets to repay your creditors. In the process, you will lose ownership over your business, but it can serve as the fresh start you’ll need to restore control over your finances and potentially begin a new business venture.

Chapter 7 is available to all types of businesses, including sole proprietors and LLCs.

Chapter 11

Chapter 11 restructures debt into a manageable repayment plan, potentially discharging unsecured debt at the end of the plan. As a small business such as an LLC, sole-proprietor, or any other self-employed individual, you may be able to take advantage of Subchapter V, a new version of Chapter 11 that took effect in February of 2020 under the Small Business Reorganization Act.

Subchapter V eliminates many of the obstacles that previously made Chapter 11 impossible for entities other than corporations. Through Subchapter V, you may be able to reorganize and reduce your debt—without going out of business. To initially qualify, you must owe less than $2,725,625, at least 50% of which was accrued through business activities.

Chapter 13

The only type of business than can qualify for Chapter 13 is the sole proprietor. As a sole proprietor, you may reorganize your debt into a 3-5-year repayment plan, saving most or all of your assets from liquidation. Chapter 13 is best for those with assets and business operations they want to save and an income or revenue substantial enough to make consistent payments through the course of the plan.

Chapter 12

If you are a family farmer or fisherman, you may be able to restructure your debt as you would in Chapter 13. Chapter 12, however, offers flexibility and periodic payments to accommodate the seasonal operations of farmers and fishermen.

To qualify, you must earn more than half of your income from a farming or fishing operation. If you are a farmer, you can owe no more than $10 million, at least half of which was accrued through farming expenses. If you are fisherman, you can owe no more than about $1.9 million, 80% of which must have been accrued through fishing expenses. This debt does not include home mortgages. 

Let Us Help You Attain Financial Freedom

Bankruptcy is often associated with failure. Many people don’t know, however, that some of our nation’s most affluent individuals and businesses filed bankruptcy before achieving great success. Whether you want to attain complete financial freedom through liquidation or rescue your business through a restructuring process, we have the knowledge and resources needed to assist.

Let our small business bankruptcy lawyer guide you through this difficult process. Call or contact us online to get started as soon as possible.


Personal Attention

We will work to help you move confidently through the legal process and court system, while keeping your goals in mind at all times.


Providing legal counsel and services to people and businesses in Cincinnati and surrounding Ohio counties. Call Attorney Southard to schedule an appointment today.