Small Business Bankruptcy Lawyers in Phoenix
Compared to individuals and corporations, small businesses are extraordinarily sensitive to fluctuations in market trends and the national economy. If your company is struggling to stay afloat, you may be deciding whether to let it go or keep fighting.
At The Gavel, our small business bankruptcy attorneys have extensive legal experience. We have helped innumerable business owners implement long-term resolutions to their overwhelming financial crises. The U.S. Bankruptcy Code provides several options for struggling businesses, but choosing between these and navigating the process requires years of practice and in-depth knowledge.
The type of bankruptcy you choose will greatly affect its impact on your small business. Each chapter offers different advantages and disadvantages, and our team at The Gavel can work closely with you to determine which path is right for your company.
You may benefit from the following types of bankruptcy:
- Chapter 7 - If you would like to free yourself from the burden of your business, Chapter 7 bankruptcy may be your best option. When a business files Chapter 7, the trustee essentially takes ownership of the business and its assets, liquidating the company to repay creditors. This dissolution can give you the freedom you need to begin another venture.
- Chapter 13 - If you are a sole proprietor or another self-employed individual, you can use Chapter 13 to reorganize both your business debt and personal debt into a manageable 3-5-year repayment plan. Unfortunately, business entities such as corporations, LLCs, and partnerships cannot file Chapter 13.
- Chapter 11 - This is the most complex and expensive form of bankruptcy, but a successful filing can allow companies to reduce their debt without going out of business. Recently, the Small Business Reorganization Act made Chapter 11 much friendlier to small businesses.
What Is the Small Business Reorganization Act?
The Small Business Reorganization Act of 2019 (SBRA) was signed into law in August of 2019 and went into effect in February of 2020. The act added Subchapter V to Chapter 11, which allows qualifying small businesses to reorganize their debt and, eventually, emerge from bankruptcy as a viable company. Corporations and other large companies are not eligible for Subchapter V.
Essentially, Subchapter V is designed to streamline the bankruptcy process for small business debtors. The act lowers costs and implements a less stringent plan confirmation process. Like Chapter 13, Subchapter V requires the business to submit a plan to allocate all calculated disposable income to both secured and unsecured debts over a 3-5-year period. Subchapter V is designed to better enable small businesses to survive bankruptcy and retain control of its operations, versus a Chapter 7 liquidation or the traditional Chapter 11 path.
Subchapter V specifically applies to small businesses that owe no more than $2,725,625, at least 50% of which must have arisen from commercial or business activities. In late March of 2020, however, the Coronavirus Aid, Relief, and Economic Security Act temporarily increased the cap to $7.5 million. The increase is scheduled to expire on March 27, 2021, upon which it will drop back down to the $2,725,625 cap.
Bankruptcy is an exceedingly complex process—especially for businesses. With our team on your side, however, you can maximize benefits, minimize losses, and shorten the time it takes to reach a place of financial freedom.
Business and individual solutions!
Custom tailored solutions for your case.
Accessibility to a legal team that is rooting for you.
High level of quality service & genuine care for your success.