Orlando Small Business Bankruptcy Attorney
If you are the owner of a small business and the company has taken on significant debt, you may have already considered filing bankruptcy. Many small businesses file Chapter 7 bankruptcy rather than Chapter 11 because the process is more straightforward and less expensive. Through a Chapter 7 bankruptcy, you can also eliminate many different types of debt, which can give you and your business a fresh start. Still, there are times when a Chapter 11 bankruptcy makes more sense. Below, our Orlando small business bankruptcy attorney explains more.
Chapter 7 Bankruptcy for Small Businesses
Chapter 7 bankruptcy is also known as a liquidation bankruptcy because certain assets of the business are sold to cover a portion of the debt. Through a Chapter 7 bankruptcy, a small business can eliminate their debt and shut down business operations in an orderly manner. After the business’ assets are sold, the bankruptcy trustee will distribute the proceeds among the creditors and if there are any remaining debts, they are discharged. Chapter 7 bankruptcy is often best for businesses that do not have a viable path for recovery and need to permanently shut their doors.
It is important to note that if a business owner has personally guaranteed a business debt, filing Chapter 7 may not release the owner from liability for the debt. Also, if a business owner engaged in illegal or fraudulent activities that resulted in bankruptcy, they can still be held liable for any debts that resulted from such activity.
Chapter 11 Bankruptcy for Small Businesses
Chapter 11 is known as a reorganization bankruptcy. Instead of discharging a business’ debts, Chapter 11 reorganizes them into a repayment plan. New repayment terms can also be negotiated with creditors such as lower interest rates, debt forgiveness, and extended repayment periods. Chapter 11 is best for businesses that have a plan for recovery and can keep their doors open, but need some financial help.
Until Congress passed the Small Business Reorganization Act of 2019 (SBRA), Chapter 11 posed many problems for small businesses. The process was far too complicated, and the costs were very high. However, the Act was passed specifically to help small businesses struggling with high levels of debt, and to help them return to financial security. The SBRA added Subchapter V, which includes many features meant to make the process easier and more affordable for small businesses. These features include:
- Increased debt limit, making it easier for businesses to qualify,
- A simplified process,
- A simplified plan confirmation process,
- The help of a bankruptcy trustee, and
- A discharge of all or most debts.
While Subchapter V has provided many protections for small businesses, it is still important to note that not all companies are eligible.
Our Small Business Bankruptcy Attorney in Orlando Offers Sound Legal Advice
There are many benefits of filing bankruptcy for your business, but the right choice is not always clear. At Florida Law Advisers, P.A., our Orlando small business bankruptcy attorney can advise you of your options and help you determine which one is right for you. Call us now at 1 (800) 990-7763 to schedule a consultation and to get the legal help you need.
