Using Bankruptcy Laws to Protect Your Business Interests After the COVID-19 Pandemic
Small businesses are taking a huge hit because of the COVID-19 pandemic, with an estimated 7.5 million family and small enterprises at risk of closure. American bankruptcy laws were enacted precisely for times like these, when honest, hardworking people face unanticipated financial challenges. You can use bankruptcy to minimize the impact of shutting down a business or to buy some time to get back on your feet. Either way, bankruptcy will give you the immediate protection of the “automatic stay,” which prevents creditors from calling, writing, or taking any other action to collect outside of the bankruptcy proceeding. The stay can give you a breather, allowing you to regain your financial footing without continual harassment.
Here are the bankruptcy options for small businesses.
Chapter 7 Liquidation
If your prospects for continued survival are bleak, this may be the best course of action. With Chapter 7, you can permanently discharge certain unsecured debts in exchange for transferring assets to the bankruptcy trustee, who will sell them to satisfy your creditors. Under Chapter 7, you’re unable to keep most assets, but you won’t have any further financial liability for the discharged debts.
Chapter 13 Reorganization
Chapter 13 is generally allowed only in personal or consumer bankruptcy filings. It allows you to restructure your debt, essentially making new arrangements to repay your creditors over a three-to-five-year period. A business run as a sole proprietorship also can seek to renegotiate financial obligations through Chapter 13.
Chapter 11 Reorganization
A Chapter 11 reorganization allows businesses to do what consumers can do through Chapter 13.You’ll be required to put together a reorganization plan, which must be approved by your creditors and the bankruptcy court. You must comply with the provisions of the plan or your bankruptcy can be terminated and the automatic stay revoked.
Contact Attorney Howard N. Sobel
At the office of Howard N. Sobel, we work closely with people who suffer personal injury in New Jersey. Contact our office online or call us at 856-424-6400 to set up a free initial consultation. We are currently available by phone, text message, or videoconference. Evening and weekend appointments can be arranged upon request. We accept all major credit cards.
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