If your small business is struggling with debt, bankruptcy relief may be an option.
You’re lying awake at night wondering how you’re going to make payroll. Many of your suppliers are threatening to switch you to cash on delivery (COD) or to cancel your account all together. You know the IRS will soon be knocking on your door to collect taxes. You’re in financial trouble and you think, “What am I going to do?”
When our small business owners walk through our door, many are stressed, beaten down, sleep deprived and just want someone to help them. That’s where we step in. While talking about bankruptcy is never enjoyable, it could be the solution you need to save your business or to get out from the crippling situation you’re in.
When we do our analysis of your business, we look at the whole picture to accurately determine whether your business should be reorganized, liquidated or if a work-out is possible. We listen to your thoughts and concerns and take that into account when we offer our recommendations.
Here’s some basic information about bankruptcy relief available to small business.
Types of Bankruptcy
The business type and structure will largely determine the type of bankruptcy filed.
Chapter 7 – Businesses filing for Chapter 7 bankruptcy are allowed to keep certain exempt property, but a trustee usually liquidates much of the property in order to maximize the recovery to creditors. The goal of a debtor is to discharge (i.e., obtain a legal release) existing debts and allow for a fresh start. In other words, when the discharge is granted, the debtor is legally released from the debts that were incurred before filing for bankruptcy. The creditors are entitled to share in the proceeds obtained from the liquidation of non-exempt assets. Under Chapter 7, the amount the creditors will get is fixed by the value of the non-exempt assets. More.
Chapter 11 – Chapter 11 bankruptcy allows time to repay debts and propose a repayment plan to creditors, or to conduct an orderly liquidation in an effort to maximize the value of the assets or going concern business. Chapter 11 reorganization is the most complex of all bankruptcy cases and generally the most expensive. However this is an option for small businesses that want to continue operating. More
Chapter 13 – Chapter 13 allows a debt-laden person or sole proprietorship that still has significant income to submit a plan to the courts to pay back debts over a few years. Doing so can provide advantages to the debtor not found in other forms of bankruptcy, such as preventing foreclosure of a residence. Chapter 13 can also restructure tax obligations in addition to protecting individuals from the collection efforts of creditors, permitting individuals to keep their real estate and personal property, and providing individuals the opportunity to repay their debts through reduced payments. In Chapter 13 debts may be discharged that would be non-dischargeable under other chapters. More
Chapter 12 - Chapter 12 bankruptcy allows family farmers and family fishermen the ability to restructure their debts. Both individuals and business entities engaged in a farming operation are eligible for relief under Chapter 12. A reorganization plan is central to Chapter 12 and is required to be filed with the court within 90 days of filing the initial bankruptcy petition. The plan will detail how the farm intends to continue operating while in bankruptcy and will provide for a restructuring of secured debts, including the possibility of “cram down” where the creditor’s secured claim is reduced to the value of the collateral.