As the coronavirus spreads rapidly across the world, the Chinese and other country’s supply chain problems are not the only problem anymore. The CDC (Centers for Disease Control and Prevention) has asked for the suspension of the gathering of ten or more people in one place. Various stores, bars, and restaurants in the U.S. and other countries are closed for business. There may be a curfew in place shortly with other social distancing measures being enforced to slow down the spread of the virus.
Some small businesses are adapting to these circumstances well with the local businesses encouraging their clients to purchase articles for future use. Online purchases are encouraged wherever possible. It is expected that the raised online sales will make up for declining in-store sales. Congress is in the process of passing legislation to benefit various businesses that will be hit hard by the coronavirus crisis.
Filing a Chapter 11 Bankruptcy
Filing for chapter 11 bankruptcy may be one of the good options for retailers facing increasing financial pressure as a result of the coronavirus crisis. If the small businesses cannot work out any deal with the lenders and landlords and in case there is no government relief available or if it is not available fast chapter 11 bankruptcy may offer a pause button for the small business owners in distress.
If a small business declares chapter 11 bankruptcy it can still operate as a normal business. Chapter 11 bankruptcy means there is an automatic stay on the actions of the debtor. It stops the collection of business debts present as of bankruptcy filing. This also provides the business breathing space to stabilize their operations and allows them to work on a plan for the repayment of the creditors. In addition to that, this breathing space allows the small business owner to maintain his business as it is waiting for possible assistance via government-funded programs.
In recent years, there has been constant pressure on small businesses to file chapter 11 bankruptcy to reorganize or liquidate their timetable. The retail industry has some high-value goods and a low going concern value. Due to the coronavirus crisis, this trend might go toward the more conventional chapter 11 plans. A conventional chapter 11 plan will permit the retailer to spread the debt payments over a while and take comprehensive measures for the business and adapting it to the new markets.
Congress had also recently enacted the small business provisions in chapter 11 for small businesses with debts under $2,725,625. These small business filings with chapter 11 provisions will trigger automatic stay along with other bankruptcy provisions. It will also streamline the chapter 11 filing process and decrease the costing involved in chapter 11 for the eligible small businesses. After the action being taken for the small business chapter 11 provisions concerning the bankruptcy code, the small businesses to whom the conventional chapter 11 provisions were cost-prohibitive will qualify for the relief.
The capabilities of the U.S. businesses to adapt to the evolving business scenarios are a significant portion of the reason why the US economy is so resilient. The coronavirus crisis will test all industries especially the retail industry, which was struggling anyway.
However, if history is to be considered most businesses will adapt and emerge again in another form wherever necessary. The demand from the consumers for goods is going to rebound eventually and they are going to need good companies to buy from so the market will make the necessary adjustments.
If you are struggling to visualize the future for your business in the Tampa, FL area, you can contact The Weller Legal Group. The company is an expert in handling bankruptcy cases and has been in operation since 1993.
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