For a long period, there was just a single small business bankruptcy alternative available and that was chapter 7 liquidation. If these small businesses were keen on operations they had to file for their chapter 11 protections that had numerous paperwork necessities. Luckily congress stepped up to this plate and in 2019 passed Small Business Reorganization Act that is known as subchapter V. These bankruptcies became more streamlined. The concerned small business got all those advantages of chapter 11 such as restructuring of loans without facing all the hurdles big companies have to go through.
It is an excellent alternative for small businesses. But, due to the upcoming changes in bankruptcy laws, it means all businesses have to act quickly if they are looking to get chapter 11 protection. Keep in mind that Congress did not make this streamlined subchapter V alternative available for every business. Rather you will find some key limitations and one of them is a restriction on maximum debt. In a normal case, a business cannot have an accrued debt of more than $2,725,625 in the form of secured or unsecured debts. But congress later in April 2020 also passed CARES Act that temporarily raised this debt limit to a more lenient $7, 50,000. It was almost 3 times the original limit. It allowed several small businesses to take advantage of a more simplified approach to chapter 11. However, there was a catch to all this. This higher limit has expired on March 27, 2021 and it has again fallen back to around $2,700,000. But, if you are contemplating small business bankruptcy this may be the right time to do so.
Reorganizing the debts smartly
There is no need for a company to just shut off everything to take advantage of small business bankruptcy. Several clients have leases and debts that are not working out for them anymore. They may also have some liens encumbering their business assets. All these things can be reworked into a small business bankruptcy that will allow you to emerge from the pandemic on a firmer footing. Savvy businessmen get an upper hand by using chapter 11 as they are trying to control debt desperately. In the end, a judge can force your creditors into accepting some repayment plan that allows you to pay less than what you owe. Many secured debts can also become unsecured via their small business bankruptcy process.
If your business lies in Tampa, FL area, you can get in touch with the experienced lawyers from Weller Legal Group. This firm has helped several small businesses and family businesses in Tampa, FL area with small business bankruptcies. Call now for scheduling your initial consultation.
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