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Small Business Bankruptcy

GeorgetteMillerLaw.com > Practice Areas  > Bankruptcy Solutions  > Business Bankruptcy > Small Business Bankruptcy

Discuss Your Options with a New Jersey Small Business Bankruptcy Attorney

Many small business owners struggle to make ends meet. While building a business from the ground up can be a highly rewarding experience, it can also be risky. In business, there are never any guarantees. If you are a business owner and you are dealing with difficult financial times, you should discuss your options with a New Jersey small business bankruptcy attorney.

Small business owners in New Jersey have a variety of options when it comes to filing for bankruptcy. Along with the traditional options under Chapters 7, 11 and 13 of the U.S. Bankruptcy Code, small business owners have access to some special opportunities as well. These special opportunities can significantly reduce the time and cost involved in getting a fresh start, and they will prove to be the best options for many entrepreneurs.

Special Bankruptcy Options for Small Business Owners

The special bankruptcy options for small business owners exist under Chapter 11 of the U.S. Bankruptcy Code. While small business owners can pursue traditional Chapter 11 bankruptcies when warranted, they may also be able to pursue either (i) a streamlined bankruptcy under the Small Business Reorganization Act (SBRA) or (ii) a “small business case” under the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA).

As explained by the U.S. Courts:

“A [small business] debtor may elect either of these two options based on certain eligibility criteria. Both [BAPCPA] and [SBRA] cases are treated differently than a traditional chapter 11 case primarily due to accelerated deadlines and the speed with which the plan is confirmed. The two types of cases have different debt limits, defined as the total amount of noncontingent liquidated secured and unsecured debt at the time the debtor files their bankruptcy case.”

For many small business owners, the costs of pursuing a traditional Chapter 11 bankruptcy can be prohibitive. This is precisely why Congress enacted the SBRA and BAPCPA. A New Jersey small business bankruptcy attorney can help you determine if  you qualify to pursue either (or both) of these options; and, if you do, your attorney can help you choose the best path forward.

In many cases, pursuing a small business bankruptcy under the SBRA (also referred to as a Subchapter V bankruptcy) will be the best option. While the SBRA has more stringent qualification requirements than the BAPCPA, most entrepreneur-owned small businesses will qualify under Subchapter V. Some of the benefits of pursuing a Subchapter V bankruptcy as a small business owner in New Jersey include:

  • Subchapter V Small Business Bankruptcies are Subject to Limited Oversight – In a small business case under the BAPCPA, “[t]he U.S. trustee will . . . monitor the activities of the debtor . . . to identify as promptly as possible whether the debtor will be unable to confirm a plan.” However, in a small business bankruptcy under Subchapter V, the trustee’s role is simply to, “facilitate[e] the development of and oversee[] the debtor’s plan of reorganization.”
  • Creditors Cannot Submit Their Own Reorganization Plans Under Subchapter V – Under the BACPA, creditors have the opportunity to submit a reorganization plan for consideration during the bankruptcy process. But, in a Subchapter V bankruptcy under the SBRA, “only the debtor may file a plan.”
  • The Plan Confirmation Requirements Under the SBRA Are More Lenient Than Those Under the BAPCPA – Under the BAPCPA, creditors also play more of a role in the plan confirmation process. While creditors can provide input in a small business case, in a Subchapter V case, the small business’s proposed plan will be confirmed, “as long as [it does] not discriminate unfairly, [is] fair and equitable with respect to each class of claims or interests, [and] provide[s] that all projected disposable income of the debtor (or equivalent value) is paid into the plan for a three to five year period.”

Regardless of which option you ultimately choose, pursuing a small business bankruptcy under Chapter 11 can afford several forms of financial relief. For example, whether you hire a New Jersey small business bankruptcy attorney to guide you through a small business case or a Subchapter V bankruptcy, successfully navigating the process will provide relief including:

  • An “automatic stay” that stops collection efforts during the bankruptcy process;
  • Reorganization of your small business’s debts into a manageable three to five-year payment plan;
  • Eliminating some or all of your small business’s unsecured debts;
  • Allowing you to maintain control of your business throughout the bankruptcy process; and,
  • Allowing you to continue operating your business after your small business bankruptcy.

Traditional Bankruptcy Options for Small Business Owners Under Chapters 7, 11 and 13

While SBRA and BAPCPA bankruptcies are good options for many small business owners, entrepreneurs should not consider these options exclusively. When seeking bankruptcy protection, it is important to work with an experienced New Jersey small business bankruptcy attorney who can help you carefully evaluate all of the options you have available. Depending on your small business’s financial circumstances (and your own personal financial circumstances), your options may also include:

Chapter 7 for Small Business Owners

If you are prepared to close your small business, then you may want to consider filing for bankruptcy under Chapter 7 of the U.S. Bankruptcy Code. Filing under Chapter 7 allows you to eliminate the maximum amount of your small business’s debts. But, it also involves liquidating your small business’s non-exempt assets; and, as a result, this generally means shutting down your business and moving on.

Chapter 11 for Small Business Owners

Small business owners also have the option of pursuing a traditional business bankruptcy under Chapter 11, without utilizing the provisions of the SBRA or BAPCPA. As noted above, this option will prove cost-prohibitive for small business owners in many cases. But, when it isn’t there can be benefits to pursuing a bankruptcy outside of the confines of a small business case or Subchapter V.

Chapter 13 for Small Business Owners

Filing for bankruptcy under Chapter 13 is another viable option for many small business owners in New Jersey. Filing under Chapter 13 is similar to filing under Chapter 11 in that it allows you to reorganize your small business’s debts and continue operating post-bankruptcy. If you still have plans to grow your business and just need some financial breathing room in order to do so, then a Chapter 13 filing is definitely an option to discuss with your New Jersey small business bankruptcy attorney.

In some circumstances, it will make sense for small business owners to consider alternatives to bankruptcy as well. If you can work with a New Jersey small business bankruptcy attorney to eliminate or restructure your business’s debts outside of the formal bankruptcy process, this could provide the financial relief you need without the burdens that come with a Chapter 7, 11 or 13 bankruptcy.

When Should You Consider Bankruptcy as a Small Business Owner in New Jersey?

As a small business owner, when is it time to consider bankruptcy? Filing for bankruptcy may be a good option for securing financial relief if:

  • You have made an effort to reduce your business’s expenses but are still struggling to pay your business’s bills or make payroll on time.
  • You have laid off employees in order to reduce your payroll, and now your business is falling behind on customer orders.
  • You are relying on a line of credit or business credit card to pay your business’s utilities, payroll or other expenses.
  • You are using your personal funds to cover your business’s expenses due to a lack of revenue.
  • You have started paying your personal bills with a credit card because you aren’t taking any money out of your small business.
  • You have fallen behind on your small business’s bills and are now receiving collection letters or threats of legal action.
  • You are at risk for having your business’s equipment repossessed or your house foreclosed.
  • You aren’t paying your business’s taxes (or your personal taxes) or you are concerned about how you are going to make your next quarterly or annual payment.

For many small business owners, their financial problems start small. They find short-term solutions, and they assume that they will be able to turn things around. Unfortunately, this isn’t always the case. Small businesses struggle for a variety of different reasons; and, if your small business is struggling, it is important to take action before it is too late. While filing for bankruptcy (or pursuing a suitable bankruptcy alternative) can be an effective solution, waiting to file can limit the benefits that are available to you. There is no harm in learning about your options, and you owe it to yourself, your family, your customers and your employees to ensure that you are making smart decisions.

Request a Free Consultation with a New Jersey Small Business Bankruptcy Attorney

If you would like to know more about the options you have available, we invite you to get in touch. To request a free consultation with New Jersey small business bankruptcy attorney Georgette Miller, please call 866-964-6529 or tell us how we can help online today.