Will Bankruptcy Help If I Want To Keep My Business Open??
Will Bankruptcy Help If I Want To Keep My Business Open?
“Will bankruptcy help me if I want to continue my business?” Clients often ask me, “I want to file bankruptcy or I’m thinking about it for my business, but I don’t want to shut my doors. I don’t want to close the business.” Well, there are options because there are different types of bankruptcy that you can file.
There’s the chapter 7 bankruptcy, which is a complete liquidation. It’s like closing your doors and selling off your assets to pay whatever debts are there and the business is closed; it’s done. However, there are some other options including a chapter 11, which is a restructuring of your business, and this is what you hear on the news a lot about.
Big corporations, especially these days, are doing a chapter 11 restructuring of their business. You’ve negotiated or forced terms on your creditors to basically get current on your debts, maybe even get better terms and better interest rates, and continue to operate the business. And you get a little relief in the meantime while you’re doing the chapter 11 process.
A new option for small businesses
There is also a new process that has become available within the last year or two: the small business bankruptcies that are allowed under chapter 11. They used to be a lengthy and very expensive process in a chapter 11. It could take a couple of years to get a plan confirmed and you were looking at $50,000 to $150,000 in legal fees to get there.
The new chapter 11 is more streamlined for small businesses that have less than approximately 2.7 million in total debts. They can utilize that streamlined process and save quite a bit on legal fees and time to get a plan approved. And then they can get on with running their business.