To call the last three years strange would be a remarkable understatement. The reality of the health crisis that emerged in early 2020 affected nearly every aspect of our lives, and the damage caused to the economy is having ripple effects to this day. Any small business that was already dealing with a financial crisis when the lockdowns and closures began may have been unable to weather the situation, and many closed during the course of the crisis. However, many businesses that managed to survive are only now being forced into making hard decisions. Whether they had financial help during the pandemic or simply ran out of resources, many Sarasota area small businesses are just now considering their options – including filing for small business bankruptcy.
If you are a local small business owner struggling with overwhelming debt, now is a good time to contemplate what you really want. Understanding both your current situation and where you may be over the next year could be the key to deciding whether or not your company should file for bankruptcy.
Do You Want to Close Down – or Would You Prefer to Stay Open?
At this point, some small business owners are tired of the battle and are ready to move on to a new chapter. They just need to come up with a plan of action for methodically closing down the operations and resolving their business debts.
Many people who have decided to close their doors consider filing a Chapter 7 bankruptcy. This option could be a viable solution for those who only have a few assets and limited income – but lots of debt. One of the most significant downsides to filing for Chapter 7 is that you may have to relinquish some assets as the bankruptcy trustee reviews options to either pay or discharge your small business obligations.
For those who want to find a pathway to remaining open and keeping the business, Chapter 13 or Chapter 11 might be more appropriate.
Chapter 13 assists those who are either not eligible for a Chapter 7 bankruptcy – or would prefer not to liquidate their assets. This form of bankruptcy may be most appropriate for sole proprietorships and companies where the business owner’s assets are involved with the company’s business debt. The good news is that business owners who file Chapter 13 and successfully complete their repayment plan can restructure their businesses instead of closing their doors.
Chapter 11 is another alternative for a struggling business. This type of bankruptcy was traditionally best for large companies that wanted to reorganize. In fact, most people associate Chapter 11 bankruptcies with business reorganization.
But times have changed, and the Small Business Reorganization Act(SBRA) that was passed during the Trump administration offers another option to small business owners considering bankruptcy. The SBRA gives small businesses the opportunity to reorganize in a more cost-effective way than Chapter 11 traditionally offers. That being said, Chapter 13 is often the best choice for sole proprietorships and other small business entities.
Call Today to Learn More About Small Business Bankruptcy
Bankruptcy attorney Richard V. Ellis has the expertise you need to navigate bankruptcy, whether personally or for your Sarasota area small business. Mr. Ellis strives to help his clients overcome their legal and financial challenges and gain the freedom to move on with their lives. Call today to learn more – you may be surprised at just how many options you have – and how easily you can work through your issues with the right professional assistance and guidance.