The COVID-19 pandemic saw a wave of large businesses file for bankruptcy. Common household names like Greyhound and J.Crew had bankruptcy lawyers working overtime. Still, it was small business owners that suffered the most. For many ma-and-pa businesses, filing for bankruptcy was the only way to reset and get a fresh start.
This post will examine the ins and outs of filing for bankruptcy as a small business due to COVID-19-related circumstances. We’ll also investigate how legal representation can help you navigate the process. Bankruptcy lawyers can offer advice to help you make good decisions through the process.
Effects of COVID-19 on small business owners
COVID-19 public health measures sent the world into lockdown. It closed shops, restaurants, industries, and theaters. These closures were catastrophic to small businesses that were already struggling to survive. It’s estimated that 40% of small businesses in the United States will close in the next year due to the challenges of COVID-19.
While many small businesses will simply shut their doors and disappear, bankruptcy may give some a chance at a fresh start. Bankruptcy can also offer relief for small business owners who have already closed their businesses. Some may shut their doors but still struggle to repay their remaining debt. Bankruptcy lawyers can help by accessing new provisions. These are designed to help small businesses through bankruptcy due to COVID-19.
Types of bankruptcy for small businesses
Chapter 7 bankruptcy
If you want to close the doors of your business and call it quits, Chapter 7 bankruptcy will get rid of your debt and get creditors off your back. Chapter 7 will shut down your business by liquidating your assets to pay off your creditors. If you want to keep your business open and restructure your debt, Chapter 11 bankruptcy may be a better option.
Chapter 11 bankruptcy
Chapter 11 bankruptcy is the commercial bankruptcy code. It lets businesses restructure their debts and negotiate for better terms. Often, they can remain open while they work to pay off their creditors. Typically, Chapter 11 is expensive and can take a long time.
Chapter 11 is usually used by large corporations. The time frame and expense make it out of reach for most small businesses to access. These barriers make it difficult for many small business owners (SBOs) struggling with debt who want to restructure to file for bankruptcy.
A new bankruptcy law called the Small Business Restructuring Act makes bankruptcy more accessible for small business owners. This law simplifies the bankruptcy process. It allows small businesses to take advantage of Chapter 11 bankruptcy through these changes:
- it makes a faster and more flexible timeline;
- letting a judge approve a restructuring plan instead of creditors;
- they can run their business while they pay off their debts.
These new changes can help small businesses stay afloat as they navigate these trying times.
How bankruptcy lawyers can help
Navigating a bankruptcy claim can be complicated and challenging. Understanding the bankruptcy code’s complexities is essential to get the best outcome. The banks and creditors will have legal representation fighting for them. You need to have experienced bankruptcy lawyers by your side.
LegalASAP can help you if you’re searching for “lawyers for bankruptcy near me.” Our network of experienced and trusted bankruptcy lawyers can look at your claim and help you navigate the storm.
To access our LegalASAP network of bankruptcy lawyers, take our free evaluation to see if you may qualify. Qualified clients can get the help they need and get on their way to a fresh new start. Contact LegalASAP today.