The COVID-19 pandemic has hit Americans hard. Perhaps no one has seen more of an impact than those who own and operate small businesses. They are facing tribulation on nearly all fronts – personal, professional, and everything in-between. From balancing caring for and keeping their children safe to ensuring that their business remains afloat, American business owners are struggling.
Most people hoped that by 2021, the pandemic’s weight would be lifted. However, it isn’t looking likely. Rollout of the vaccination effort has been slow and economic recovery for both businesses and individuals has been spotty at best. As such, numerous business owners have fallen behind on their everyday expenses and operation costs and are looking for relief options.
One of the most common options being considered during this time for business owners is bankruptcy. While the very word “bankruptcy” can be intimidating, it’s important to understand the benefits of choosing this path. After all, chapter 11 bankruptcy can help a company remain in operation and continue to serve consumers while relieving a large portion of their debt.
The important thing is that the bankruptcy is handled properly. Many large, high-profile companies have notoriously mishandled their bankruptcies, leading to further legal trouble and eventual failure. Finding the balance between getting help and giving up is what makes a chapter 11 work for the businesses that benefit from it.
Until 2019, there were many issues that kept chapter 11 bankruptcy from being beneficial to small businesses. As such, it was often tantamount to a death sentence for these companies and their owners’ financial futures.
What were these problems? Chief among them was cost. The long, drawn-out process of chapter 11 as it once was often resulted in unmanageable legal fees. Likewise, administrative expense claims were required to be paid in full, upfront by the business filing for bankruptcy. This often made bankruptcy just as difficult to manage as the mounting debt that these businesses faced.
So, what changed? In August 2019, the Small Business Reorganization Act was signed into law. When this happened, chapter 11 bankruptcy changed for the better. The changes were specifically designed to benefit small businesses and their owners, who had long complained that the system was set up against them. One of the biggest changes was a new subchapter of chapter 11 bankruptcy that aimed to make filing for and achieving financial relief through the process easier for small businesses than ever before.
The new subchapter of bankruptcy created through the small Business Reorganization Act was subchapter V – often referred to in shorthand as chapter 5 bankruptcy. While this is not a standalone bankruptcy chapter, it is a powerful solution to many of the problems that small businesses had faced prior to 2019. It is also the smartest choice for many of these smaller companies who are facing financial difficulties.
What is chapter 5 bankruptcy and how does it change the experience for small businesses? Just some of the ways that bankruptcy is more beneficial for business under this subchapter include:
All of these benefits are just some of the reasons why companies facing financial complications post-pandemic are grateful for the option of the chapter 5 bankruptcy subchapter.
It can be difficult to determine whether bankruptcy is the right course of action for your business- especially while you’re contending with all the emotions that have settled on the shoulders of Americans over the last twelve months. Most of us are dealing with a lot of concerns, including personal health and the safety and health of our families. As such, making the best decision for your business can be nearly impossible without legal guidance.
Clear-eyed and experienced legal counsel is the best asset you can have in your corner during this trying time. When you contact the staff at the Van Horn Law Group, that’s exactly what you’ll get. Give us a call today to schedule a consultation and get the help you need to determine what the best possible course of action for you and your business is in 2021 and beyond!
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