Business Bankruptcy Options
With no end to the COVID-19 outbreak in sight and a series of economic impacts on the rise, the repercussions of this pandemic have yet to be seen. Small businesses are now vulnerable to supply limitations as manufacturers decrease production. When your cash flow no longer supports your business debts, your personal assets are in danger, and so is your livelihood.
Increased debt, coupled with a lack of customers and resources, is taking its toll on countless businesses right now. Soon, contractual agreements made between companies will suffer because of coronavirus. Many find that despite their best efforts, the only option is to file for bankruptcy. This choice is hard to make, but without it, businesses may face legal trouble if dues are not satisfied.
Bankruptcy is a necessary last resort when your small business is having financial trouble. Despite your best efforts, unavoidable circumstances occur every day.
Always consult an attorney before filing for bankruptcy. Our attorneys at The Pope Firm are experts in the legal proceedings of business bankruptcy filing in East Tennessee. We work with small business owners to identify the best course of action and walk you through your options.
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What Type of Bankruptcy can a Business File?
When your business can no longer pay off its debt, bankruptcy is the legal process to take. There are different forms, including Chapter 7 and Chapter 13. Each has different characteristics based on the issue the business is facing.
Chapter 7 Bankruptcy
The most common form of bankruptcy, Chapter 7, involves the liquidation of your business assets under the protection of the court. The court evaluates your assets, then liquidates or sells them to pay off creditors.
Our attorneys evaluate your business assets to determine your best course of action for Chapter 7. We negotiate with creditors, preventing them from harassing you. Chapter 7 bankruptcy is often the last resort for sole proprietorships and small businesses.
Chapter 13 Bankruptcy
In some cases, your business may have a fighting chance, and reorganization, as opposed to liquidation, can help resolve your situation. With a Chapter 13 bankruptcy filing, you have at least five years to pay off your debt. Your personal assets are not affected, and your creditors receive payment based on priority.
With a reasonable payment plan, your business doesn’t have to close. To make sure your finances are overseen, the court appoints a bankruptcy trustee. If you are a sole proprietor, you can file a Chapter 13 in your name. However, some small businesses can’t file for this form of bankruptcy, depending on their circumstances.
Will I Lose my Business if I File for Bankruptcy?
It depends on your business, creditors, and assets. A sole proprietor with limited assets may need to liquidate and file for Chapter 7 bankruptcy. In this case, your credit card cannot support business debt for years, especially if your business is already suffering.
If your small business fell on hard times but may be able to recover in the future, you don’t need to lose your business. That’s why consulting a bankruptcy attorney is essential, especially with the economic impacts of COVID-19.
The Department of Labor is reportedly overwhelmed with applications as a result of the outbreak. If you have already filed for bankruptcy, contact The Pope Firm for the latest legal updates in bankruptcy proceedings. We are ready to answer your questions and prepare you for what comes next.
What Happens When a Small Business Files for Bankruptcy?
Small businesses don’t have the luxury of major assets and strong financial backing. The options you have ultimately depend on the type of business bankruptcy chapter you file for.
With Chapter 7 bankruptcy, all your business operations immediately stop, and the business no longer continues. A trustee assigned by the court starts the liquidation process. With Chapter 13, businesses and sole proprietorships have a chance to regain financial stability. Based on the likelihood of recovery, the court grants you time to pay off your debts.
We match you with a skilled attorney who is familiar with bankruptcy legalities. We’ll recommend the best chapter based on your situation and economic forecasts. Together, we’ll make the right decision and work with your creditors to ease your burden.
How Can a Business Avoid Bankruptcy?
There are several steps you can take to avoid bankruptcy. Your business should focus on paying off debt and cutting unnecessary expenses. Do not avoid your lenders or their calls. You must keep communication open, as you might extend the time you have to pay off debts or loans.
Since COVID-19 restricts what most businesses can do during the pandemic and quarantines, speak to an attorney before filing for a business bankruptcy chapter. We specialize in negotiation, which doesn’t have to take place in court. That may allow you to restructure your business in the meantime.
No company starts with the knowledge that it will go bankrupt. The economic health of many countries is in danger because of the outbreak. Production has slowed and even halted in cities around the world. With travel restrictions and complete border lockdowns, the main priority is survival.
Thousands of people are being laid off, and companies cannot continue to pay salaries or debts without income. Essential suppliers are unable to deliver their products to their clients, and this is a growing problem with no easy solution. Our attorneys at The Pope Firm understand the frustration and stress that come with running a company, especially amid a global crisis.
With the current uncertainty, you need a law firm that works in your best interest and that of your company. We’ve worked with countless clients to give them a clear plan for the future of their businesses. At The Pope Firm, our attorneys protect you and offer the best advice to help you plan your next move.
Before you turn to bankruptcy, talk to a professional. You might have more options than you thought, and you may be able to avoid bankruptcy altogether.
We have offices located in Johnson City, Knoxville, Kingsport, Chattanooga, and Morristown, TN and want to help you through this difficult period of your life. Contact us, and we can help you to decide how to move forward with the proceedings, and you can have confidence that your steps will be guided in the right direction.
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