Business Bankruptcy Representation
Businesses can file a Chapter 7 bankruptcy or a Chapter 11 bankruptcy depending on its goal. If a business seeks to remain open and needs help to restructure its debt it could file a Chapter 11 bankruptcy. If there is no feasible route forward and a business is going to close it would file a Chapter 7 bankruptcy.
Chapter 7
A Chapter 7 bankruptcy is a good way to close a failing business. Upon filing a Chapter 7 bankruptcy, the business must cease all operations. A Chapter 7 Trustee will be assigned to the case and it will be his/her job to liquidate any assets and obtain any funds he/she can, and then distribute the funds to the creditors per the Bankruptcy Code. It is important to determine if the owners/officers of the business have personal liability for some of the business debts, because he/she will still be obligated on that debt.
Chapter 11
A Chapter 11 bankruptcy is a tool to reorganize debts. Congress enacted a new type of Chapter 11 bankruptcy, a Small Business Subchapter 5, which went into effect in February 2020. The new Subchapter 5 allows small business to rewrite contracts, negotiate with creditors, and address unsecured debt in a more streamlined and cost-effective manner than the traditional Chapter 11 bankruptcy. The whole process can take less than five months from filing to confirmation.
To qualify as a Small Business, the person or business must be “engaged in commercial or business activities”, at least 50% of the debt must be from business activities, and it must owe less than $2,725,625.00. The CARES Act increased the debt limit to $7,500,000.00 for a one year time period, which will allow many more businesses to qualify. During the Subchapter 5 bankruptcy process the business will continue its day to day operations and a Trustee will be assigned to the case to review all the claims, provide information requested by creditors, help to develop a consensual Plan with the creditors, and make a final report to the judge. The goal is to create a Plan to address all of the debt, which may include refinancing, renegotiating contracts or leases, selling assets, and repaying a portion of debt over a three to five year period.
At The Law Firm of Ullian & Associates, P.C., we represent small businesses throughout Massachusetts in bankruptcy. Contact us and our experienced bankruptcy lawyers can meet with you to recommend a solution to provide you peace of mind.
Thinking about a business bankruptcy? | Free Consultation
To schedule a free consultation to discuss your options for a fresh financial start with an experienced bankruptcy attorney, contact the firm online or call 781-848-5980.
The Law Firm of Ullian & Associates, P.C., is a debt relief agency. The firm helps people file for bankruptcy relief under the Bankruptcy Code.