Can a sole proprietor file chapter 11 bankruptcy?

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Question:

I have a small graphics arts business. I think I need to file bankruptcy, but I don’t want to have to liquidate my business. Can I file a Chapter 11 bankruptcy like the big businesses do, even though I’m a sole proprietor?

Answer:

Yes, you can file a Chapter 11 bankruptcy—it’s not limited only to large businesses, or to corporations, even though it’s often thought of that way. According to the courts, “People in business or individuals can also seek relief in chapter 11 . . .chapter 11 is typically used to reorganize a business, which may be a corporation, sole proprietorship, or partnership.”

In short, even an individual (not in business for him- or herself) can use Chapter 11, though its main use is for businesses. However, among businesses, it does not discriminate among sole proprietorships, partnerships (including LLCs), or corporations.

Note, though, that “for the case of individuals, chapter 11 bears some similarities to chapter 13.” Since a sole proprietor is an individual—legally, there is no distinction between the sole proprietorship and the proprietor him- or herself—a Chapter 13 bankruptcy may afford you the same benefits. It would be a good idea to consult with a bankruptcy attorney, so see which form of bankruptcy is truly the best or more appropriate for your situation.

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