Is Your Business Struggling to Stay Afloat? Bankruptcy Can Save It!
If the pandemic has affected your business, you’re not the only one. Small and large business owners alike have been struggling to stay afloat and are becoming increasingly disheartened as their sales go down and debt totals go up. Many of them are contemplating bankruptcy- not to close the business down, but to save it.
Yes, it’s true- filing bankruptcy can actually save your business. In this blog, we’ll review your options and show you which one may be the best for your situation.
Chapter 13 for Sole Proprietors
If you are a sole proprietor dealing with mounting debt, filing Chapter 13 can help you deal with it while allowing your business to remain open. In most cases, you can arrange a payment plan that not only reduces your debts but also leaves you with a stronger cash flow that can keep the company going.
While most business types cannot file Chapter 13, sole proprietorships are legally indistinguishable from their owners, so you can seek this form of debt relief and possibly keep your company going in the bargain.
Chapter 11 for Businesses
You’ve probably heard of large companies like United Airlines, K-Mart, and General Motors run into financial difficulties and turn to the bankruptcy system for help getting back on their feet. These businesses- and others that are too small to be household names- file Chapter 11 to restructure their debts while keeping their doors open.
Under Chapter 11, your company puts together a debt reorganization plan for approval by the bankruptcy court. By modifying payment terms, reducing some if not all of the debts, and selling unnecessary assets, you can regain profitability
There are some special provisions for “small business debtors,” which the Bankruptcy Code defines as an individual or entity who is engaged in business activities and owes no more than $7,500,000 (excluding money owed to insiders). (Note: the limit is normally $2,725,625 in total claims, but until at least March 26, 2021, the amount has been raised due to the pandemic.
Chapter 11, Subdivision V allows these businesses to resolve their debt situation without preparing a disclosure statement or going through a creditor’s committee, which is normally appointed to represent the interests of unsecured creditors. However, there is additional oversight by the U.S. Trustee’s office and you are subject to some reporting and filing requirements that are not imposed on other Chapter 11 debtors. A Michigan bankruptcy attorney can explain all of your obligations.
Contact the Bankruptcy Team at Maxwell Dunn PLC
Time spent dealing with your debts is time that may be better devoted to growing your customer base. By filing Chapter 13 or Chapter 11, you have the time and additional financial resources to put your business back on the road to success. For more information on how you can obtain debt relief while keeping your company open, contact a bankruptcy attorney at Maxwell Dunn PLC today.See all videos