With small businesses facing crushing losses due to pandemic-related closures, many are struggling to keep going. For some, low-interest loans and new tax credits will provide enough sustenance to survive the crisis, depending on how long the slowdown lasts. Others might find that reorganizing their debt load through Chapter 11 bankruptcy is the best option going forward.
If you are considering bankruptcy for your small business but want to keep the doors open, you should understand these aspects of Chapter 11 bankruptcy:
- Methods used in reorganization plans — Under Chapter 11, businesses big and small have the opportunity to restructure payment terms, internal operations and existing agreements to help satisfy debts owed to creditors. Your court-approved plan may reduce your overall obligation and establish in place a payment plan based on your income and assets.
- Reduced costs, expedited processes for small businesses — Up until March 2020, small businesses that owed more than roughly $2.75 million were ineligible for Chapter 11 relief unless a creditor committee was created and approved a reorganization plan. However, under the Coronavirus Aid, Relief and Economic Security Act (CARES Act), a small business can owe up to $7.5 million without having to persuade creditors. In addition to streamlining the process, debtors can save on the fees associated with a potentially contested hearing and costs the committee expends on lawyers and other professionals with relevant knowledge.
- Control and oversight — Unlike Chapter 7, Chapter 11 allows debtors to retain control of their business without having to liquidate their assets. Businesses operating under Chapter 11 are overseen by a court-appointed trustee, whose job it is to ensure that the debtor is following the terms of the reorganization.
If you are considering bankruptcy, know that it can offer an opportunity to save your business. You can increase the chance for a favorable outcome by hiring a skilled attorney who has successfully represented businesses in bankruptcy matters. An experienced bankruptcy lawyer will also be familiar with the latest legislation related to COVID-19 and economic relief.
Contact a knowledgeable bankruptcy lawyer to schedule a consultation
Gastin & Hill advocates on behalf of clients seeking debt relief through Chapter 11 bankruptcy. Please call 912-232-0203 or contact the firm online for a meeting to discuss your situation.