The decision to declare bankruptcy is never an easy one, and sometimes people wait longer than they really should out of hope that things will turn around, that the business debts are resolvable, or expectations that customers will honor their debts to your business. It can be a hard decision. I get that. Sometimes it's the right decision for you and for your business. Chapter 11 is generally called a reorganization bankruptcy, and even though it's a longer, more complicated, and more expensive process, it can give you back your life and your business at the end of it.
First, you need to figure out if you qualify to file for Chapter 11 or if your debts can be resolved in some other way. Chapter 11 is not going to work if the debts you have accrued overwhelm your assets and receivables, at that point you may need to consider a different procedure. You can file for Chapter 11 with a sole proprietorship, a partnership, as an LLC, or a corporation. What a Chapter 11 does is to keep your business alive – on life support – while you do the best you can to make your business healthy again. There are special procedures and provisions for small businesses, too.
What is a “Small Business” in Chapter 11 Bankruptcy?
A small business debtor is a person, partnership, or other corporate entity who has been engaged in business and/or commercial activities, and owes less than $2,490,925 in total debt. Small businesses as defined by the code must also present the most recent balance sheet, federal tax return, cash flow statement, and statement of operations with their filing. Small business cases are also subject to more Trustee’s Office oversight and must file a plan for reorganization within 300 days of filing. As you can see, this is much more complicated than a Chapter 7, and not a DIY job – you do need a lawyer for this. It’s longer, more involved, and also more expensive. However, at the end of bankruptcy, you should exit the process with your business and be able to resume ordinary operations.
The economy is improving, but there were still 910,090 bankruptcy filings in 2014 alone. That’s not including how many were already in progress at the cutoff date. Those numbers represent a 12 percent decline from the previous year. 34,433 of those filings were for business bankruptcies, representing an encouraging drop of 22 percent. Even as encouraging as that is, it doesn’t seem to help when you’re the one looking at your business in dire straits. You need to talk to professionals who know bankruptcies to make sure that you can walk away from bankruptcy court and back into your own business. Talk to one of the professional and experienced attorneys at Van Horn Law Group. We can help you with the decision and then work with you and the courts to achieve a fair and workable solution for all parties.