Individuals and large businesses in the U.S. have long been able to file for bankruptcy with relative ease. Unfortunately, small businesses have often received less support in U.S. bankruptcy courts.
This changed in early 2020 with the Small Business Reorganization Act of 2019 (SBRA). This new act makes it easier than ever for small businesses to go through the bankruptcy filing process.
Knowing whether or not bankruptcy is the correct decision for your small business can be difficult.
Any questions about this matter should always be directed to experienced bankruptcy lawyers. Bankruptcy lawyers can help small business owners make a more informed decision and better understand the bankruptcy filing process.
For Utah-based small businesses, Blue Bee Bankruptcy is one of the state’s most trusted and experienced law firms. With a combined 60 years of bankruptcy law experience, Blue Bee’s attorneys have seen and handled it all.
When you work with Blue Bee Bankruptcy, you will receive a dedicated attorney who works closely with your case.
Blue Bee strives to make sure the process makes sense for you, and that you get the financial relief you deserve. We also work to put you in a position to rebuild your credit and succeed after bankruptcy.
Incorporated or Unincorporated?
One of the first things to consider when filing for small business bankruptcy is whether your business is incorporated.
An unincorporated small business owner can file under Chapter 7 or Chapter 13 bankruptcy. Chapter 7 will liquidate any assets tied to your business to pay off priority credits like loans and employee wages. Chapter 13, on the other hand, offers financial reorganization for your small business.
An incorporated small business does not typically need to file for bankruptcy to liquidate assets. Instead, corporate shareholders may decide on their own whether to file for personal bankruptcy. But the incorporated small business can typically liquidate on its own.
A more common bankruptcy route for incorporated small businesses is reorganization.
While Chapter 13 is not an option for incorporated businesses, Chapter 11 exists for this purpose. And as mentioned above, the recently-passed SBRA makes that process simpler for small businesses.
Technically called “Subchapter V of Chapter 11,” the SBRA was designed to overhaul the bankruptcy process for small businesses. This is accomplished by offering a streamlined and more affordable process for small businesses.
In order to qualify to file under the SBRA, your total debts must be lower than $2,725,625. The Subchapter V process is fairly similar to an individual Chapter 13 filing.
Unlike a normal Chapter 11 filing, a trustee is appointed under the SBRA to oversee your case. Under the SBRA, the debtor’s (your business) payments are made to the trustee, who then distributes them to your creditors.
Another similar feature to Chapter 13 is that the debtor must submit a Plan of Reorganization. This reorganized plan is calculated by documenting all of your monthly disposable income (income left after essential expenses).
All of your disposable income is then applied to your repayments to your creditors, handled through your trustee.
One of the biggest reliefs offered to small businesses in the SBRA is the elimination of the unsecured creditors committee.
Under normal Chapter 11 bankruptcy, an unsecured creditors committee can be an expensive and complicated element in the case. This committee is typically formed to make sure that various unsecured creditors receive repayment from a large business. These creditors are often owed small amounts of money, and thus such a committee is usually unnecessary for small businesses
A typical repayment plan under Subchapter V lasts from 3-5 years. After this time, all business debts are discharged and your business can use its new financial flexibility to continue operations.
If you think small business bankruptcy can help your business, contact Blue Bee Bankruptcy to schedule a free consultation. Blue Bee Bankruptcy is staffed by many of the most experienced bankruptcy lawyers in Utah.
Once you’ve considered all of the factors, you can make an informed decision about whether or not bankruptcy is the right choice for you. If you’re still not sure, it’s a good idea to speak with a bankruptcy attorney to learn more about your options.
If you’re dealing with the potential of bankruptcy, give us a call. Our team will work to help you by reviewing all of the options our firm has available. We will ensure you’ll get the best possible outcome for your situation.
Get in touch today so we can start working on either halting bankruptcies or preventing them from taking place altogether!
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