Time to Fold? Here's a Primer

Chapter 13 is the third option for small-business owners and individuals, with some key differences. First, Chapter 13 filers don't surrender their businesses to a trustee.

If you just need time and some accommodation to catch up on your personal debts or to prevent a foreclosure on your home, you can force your non-secured creditors to give you that time by filing Chapter 13 while keeping your business. The Chapter 13 plan may provide for repayment of only a fraction of the debt, depending on income level and the value of your non-exempt assets.

The discharge at the completion of the Chapter 13 plan eliminates any unpaid, unsecured debt. This only applies to individual debt, not corporate debt, although some company debts, such as credit cards, may be in the owner's name. To qualify, the filer can't have more than $1,010,650 in secured debt (homes, cars) and more than $336,900 in unsecured debt (credit cards, student loans, etc.)

There are other lingering consequences to consider. For instance, bankruptcy will remain on a filer's credit report for up to 10 years, depending on the form of bankruptcy filed. Also, reestablishing credit after filing can be difficult.

It's important for inventors to understand that patents, trademarks and copyrights are assets. You need to know who owns such assets -- you or your company. Depending on which form of bankruptcy you file, the assets could end up as part of the liquidation.