Coronavirus Small Business Bankruptcy Lawyer Phoenix, AZ
CORONAVIUS: Small Business Bankruptcy
At this point, many small businesses in the United States have been closed or semi-closed due to Coronavirus. When the government passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act, it included an economic relief plan for small businesses. Unfortunately, there is a lot of red tape involved in applying for a relief plan program and a limited amount of funds that are only available on a first-come-first-served basis.
Lack of access to government assistance means that small businesses have found or will find themselves in financial risk. Bankruptcy, however, can still be an option for small business owners to help relieve the burden of debt. A business entity can file for one of three types of bankruptcy:
It’s the most commonly filed bankruptcy amongst individuals, so many don’t know that business entities can file a Chapter 7 as well. If a small business owes more money to creditors than they have or can foreseeably earn, owns no substantial assets, and/or plans on closing its doors, then Chapter 7 is the usually best option. The assets the business does own will be liquated and used to pay off the debts. After that, the bankruptcy is usually dismissed. Chapter 7 often means the business is over.
Chapter 11 is primarily used when a business is struggling financially, meaning the business may still have a future. A business can “reorganize” their debt by reducing/eliminating unwanted debts while maintaining those that are necessary to continue business operations. The business files a plan of reorganization outlining how it will deal with its creditors. Creditors vote on the plan, which can often take over a year to confirm. If the court finds the plan is fair and equitable, they will approve the plan. Reorganization plans provide for payments to creditors over some period of time. Chapter 11 bankruptcies are exceedingly complex and not all succeed.
Like a Chapter 11, but mostly used by individuals or sole proprietors. The sole proprietor files a repayment plan with the court detailing on the debts will be repaid. The amount to be paid will be determined on the sole proprietor’s income, debts, and property owned. Chapter 13 is a good option for business owners whose personal assets are involved with the business assets.
What is the Best Option?
If your small business is considering filing for bankruptcy, consult with a bankruptcy attorney to learn what option is best for you and your business. Filing bankruptcy affects different businesses in different ways, and choosing the incorrect type may negatively affect you or even subject you to legal proceedings. The world of bankruptcy filings can be convoluted, only an experienced attorney will know how to best navigate it for your business’ specific needs.
If your small business is considering filing for bankruptcy, give Kamper Estrada, PLLC a call and learn what your options are. Our experienced Coronavirus Small Business Bankruptcy Lawyer Phoenix, AZ offers a free one-hour consultation.