Bankruptcy Relief For Distressed Small Businesses
For the 31.7 million small businesses in the United States, a sudden drop in revenue due to an external event can have a catastrophe impact on the financial stability and longevity of the business. Recent modifications to Subchapter V of the Chapter 11 Bankruptcy Code were enacted to help commercial businesses with fewer than 1,500 employees and more than $7.5 million in debt qualify for bankruptcy protection.
What Is The Process For Filing For Small Business Bankruptcy Relief?
Chapter 11, Subchapter V bankruptcy is designed to be faster and less expensive than a traditional Chapter 11 bankruptcy. Here is a basic outline of the steps involved to file for small business bankruptcy relief:
- The debtor files documents, including the bankruptcy petition, federal tax returns, a balance sheet, a statement of operations and cash flow statements.
- The Court issues an “automatic stay”, which halts all collections activities against the debtor during the remainder of the bankruptcy case.
- The Court appoints an impartial trustee to mediate and create a consensual plan between the debtor and the creditors. The debtor must pay the trustee. Although the trustee may investigate the financial affairs of the debtor, that is not their primary function. The debtor maintains control of assets as well as all business operations.
- The debtor must report in writing all efforts that have been made or will be made to create a consensual plan.
- A Bankruptcy Court conference is held within 60 days following the filing.
- Within 90 days after the filing, the debtor must file a reorganization plan that includes a brief history of the entire business operation, plus liquidation analysis, and all projections must be included in the proposed plan of payments. Unlike a traditional Chapter 11 bankruptcy, the plan can be laid out without requiring the acceptance of the creditors. The plan may include projected disposable income (covering maintenance, support and expenditure of business operations) along with a 3-5 year payment plan.
- The Court provides a confirmation of the plan when the debtor shows that they can make the specified payments and also meet the remedies that are stipulated to protect the creditors in the event that payments are not made.
- The Court provides a discharge at the time of confirmation for consensual plans. For non-consensual plans, the court provides a discharge when the debtor completes all plan payments.
Consult A Trusted, Local Bankruptcy Attorney
Navigating a small business bankruptcy can be tedious and complex without an experienced attorney by your side. Our trusted attorneys are well-versed in all aspects of Maryland bankruptcy code. If your Maryland business is in distress, call us to learn more about small business bankruptcy relief. Contact Jeffrey M. Sirody & Associates today for a free consultation.