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If your business faces mounting debts that can’t be paid, talk to our business bankruptcy attorney at Adam Law Group for guidance about your legal options. There are several paths a business can take to file.

Bankruptcy can happen to anyone at any time, including businesses. A business could fail because of economic reasons beyond the business owner’s control, or because the owner of a small business contracts an illness that precludes him or her from running and/or operating the business. In other cases, the company might not take off as well as the business owner thought it would. Or, maybe there is too much competition. Regardless of the factors that lead to a business bankruptcy, there is no reason to throw good money after bad.

Bankruptcy does not mean that you have to close your business. You can reorganize under Chapter 11 of the Federal Code. If you believe the company will never bounce back from being so far in debt, you can also file business bankruptcy under Chapter 7 of the Federal Code.

If you believe that your business would benefit from filing bankruptcy, contact our business bankruptcy attorney at Adam Law Group at (904) 329-7249 for a consultation and discuss which method is best for your situation.

How to File for Business Bankruptcy Florida

If your only option is to file bankruptcy, you will have some choices to make. A business bankruptcy attorney will listen to your circumstances and will ask you a few questions to determine which method of filing bankruptcy is best for your situation.

Once you and the attorney determine whether you should reorganize or liquidate, you will have to fill out several financial forms so that the attorney can create the documents the bankruptcy court requires to start the process.

When filing a business bankruptcy, you have two options: Chapter 11 to reorganize or Chapter 7 to liquidate. In some cases, a very small business set up as a sole proprietorship could file Chapter 13, which is a reorganization for individuals. Regardless of the type of bankruptcy you choose to file, some things remain the same. You will have to complete the same initial paperwork. You will still have to attend a 341 meeting of creditors. The bankruptcy clerk will assign a trustee to your case.

Bankruptcy is a complicated process to go through. You must list all of your assets and liabilities on the schedules. You must also complete a financial affidavit that shows your income and expenses. If you feel that you need to file bankruptcy, talk to our Jacksonville business bankruptcy lawyer at (904) 329-7249 to discuss your options.

Filing for Business Bankruptcy Under Chapter 11

If you decide to reorganize under Chapter 11, you also have to file a reorganization plan along with the petition and the schedules. You cannot complete a plan without first completing the schedules, since you need to know how much money you have per month to contribute to the plan.

Filing for Business Bankruptcy Under Chapter 7

You must file the same schedules if you liquidate, but you do not need to file a plan as you would if you were to file Chapter 11. Because you are liquidating, the trustee reviews your schedules for assets that you can sell to pay some of your debt.

What is the Difference between Filing Chapter 7, Chapter 13, and Chapter 11 Business Bankruptcy?

A business bankruptcy lawyer will help you determine which type of bankruptcy you can file, first, based on the law, and second, based on your circumstances. Individuals and businesses can file Chapter 7 if there is a desire to liquidate personal debts.

In most cases, only individuals can file Chapter 13. This is a reorganization that is similar to Chapter 11. In some cases, certain small businesses can file Chapter 13. For example, if you are a sole proprietor or you are not otherwise protected by the corporate veil, you might be able to file Chapter 13.

Chapter 11 is for businesses, in most cases. However, your attorney might determine that filing Chapter 11 is better for those who own a lot of property or who might be an individual but should be a business. For example, an individual who owns several rental properties but is not a business or one who is running a business as a sole proprietor might have better protection by filing Chapter 11.

When a Business Might Consider Liquidating

It is seldom advisable to liquidate a business. In many cases, once the company reorganizes under a business bankruptcy Chapter 11 or 13 filing, it can continue growing. However, if a company is relatively new and has trouble getting enough customers or a business owner becomes too sick to manage the business, Chapter 7 liquidation might be one option.

If a company is well-established but had some temporary financial challenges, it might be better to file Chapter 11 to reorganize and eliminate some of its debt. The business has a chance to become successful if it does not have to continue shouldering old debt. Our Jacksonville business bankruptcy attorney will discuss your situation with you and will help you determine whether you should liquidate or reorganize, as long as your business qualifies for either.

How Long Does It Take for a Business to File Bankruptcy?

The actual filing process does not take very long – it depends on how quickly you can get all of the documents required for the attorney to file the petition and schedules. Once you file bankruptcy, the trustee will schedule a 341 meeting of creditors.

Attendance at the 341 meeting is mandatory, whether you are filing Chapter 13, Chapter 11 or Chapter 7.

The total time from the time of filing through the discharge is:

  • Six months to many years for a Chapter 11
  • Five to seven years for a Chapter 13
  • Two months and up for Chapter 7.

Who Pays for Business Bankruptcies?

The business pays for its bankruptcy. It must pay the filing fee and must pay attorneys’ fees and costs. In some cases, the business can put the attorney’s fees and costs into the plan. When the trustee disburses the monthly payments, the attorney will be included. However, not all attorneys allow this, and not all trustees will accept the inclusion of attorneys’ fees and costs in the plan.

Business Bankruptcy FAQs

  • Chapter 13 bankruptcy is reorganization, usually for individuals. Some small businesses, such as sole proprietors, could file under Chapter 13, depending on how the business is set up. A Jacksonville business bankruptcy lawyer can advise as to whether your small business can file under Chapter 13 or if it must use Chapter 7 or Chapter 11. Chapter 13 also has debt limits and requires the debtor to have a steady income. Your income must be able to support your monthly household requirements, and you must have money left over to pay bills.

  • Chapter 11 bankruptcy is similar to Chapter 13 in that it is used for reorganization. You must file a plan just as you would for Chapter 13. A significant difference is that most businesses cannot file under Chapter 13 – they must use Chapter 11.

    In most cases, the business can stay open and continue operating as usual. However, if the debtor in possession has been accused of fraud, gross incompetence or dishonesty, the trustee could step in and run the business.

    Some new rules recently went into effect. The Small Business Reorganization Act of 2019 makes it easier for small businesses with less than $2.7 million in debts to file for bankruptcy. You must meet certain criteria to qualify for Subchapter V of Chapter 11. The Coronavirus Aid, Relief, and Economics Security Act raised the debt limit from $2.7 million to $7.5 million.

  • Chapter 7 bankruptcy allows a business or an individual to liquidate its assets to pay the bills. This is one of the easiest ways to get out of debt. You will have to sell most of your assets to pay for the debt. You can only keep property that you need to maintain a basic standard of living. The trustee seizes all other property and liquidates it to pay your creditors. In some cases, you might keep your primary home, one vehicle, and some personal possessions. All business assets are seized and liquidated.

  • The bankruptcy court assigns a trustee to oversee the bankruptcy process. The trustee also holds the meeting of creditors. In a Chapter 7 bankruptcy, the trustee manages the seizure and liquidation process and makes sure the creditors are paid. In a Chapter 11 bankruptcy, the trustee helps the debtor in possession reorganize the business obligations, assets and debts. In Chapter 13, the trustee manages the plan to pay debts over time.

  • The Chapter 11 Reorganization Plan tells the trustee about your debt. It lists your business debts by class. The class determines which debt gets paid first.

  • The 341 meeting is a meeting between the debtors. You, as the debtor or debtor in possession, are required to attend. The trustee normally schedules the 341 meeting for about a month after you file the bankruptcy petition. In most cases, the 341 meeting is held at the trustee’s office instead of the court.

    Prior to the meeting, the trustee reviews your financials. At the meeting, if creditors show up, they and the trustee will ask questions about your finances. The trustee also confirms your identity, collects any additional paperwork, and confirms the facts as stated by you in your filing.

  • Not really. You must pay some debts in full. If a debt is secured and you are liquidating that debt, the bank will take the asset. Certain debts are paid first and in full, depending on which type of bankruptcy you file. The bankruptcy could discharge some unsecured non-priority debts for pennies on the dollar, dimes on the dollar, or even dollar for dollar, depending on the amount of debt you have.

  • You probably deal with several phone calls every day from creditors. Once your attorney files the bankruptcy petition on your behalf, the automatic stay goes into effect. This means that a creditor can no longer attempt to collect past due debts from you. When a creditor calls you, refer them to your attorney. You can tell creditors:

    • That you filed for bankruptcy
    • Your attorney’s contact information
    • If you have a case number, you can give the creditor the case number.

    Do not give the creditor any other information. They can get the information they need from your attorney. The automatic stay remains in effect during the pendency of your bankruptcy case unless a creditor objects and the court agrees with the creditor. In most cases, the creditor only objects as to its debt.

  • No. The means test is only used to determine whether a debtor qualifies for filing Chapter 13. This document figures the Chapter 13 debtor’s disposable income. This is the income used to determine how much a Chapter 13 debtor’s monthly payments will be. In Chapter 11 cases, the bankruptcy court determines the debtor in possession’s disposable income.

  • Yes. The bankruptcy court requires all debtors, regardless of how they file for bankruptcy, to take a credit counseling course. You must take the course from an approved credit counseling agency.

  • Chapters 7 and 11 bankruptcies stay on your credit report for 10 years, while a Chapter 13 bankruptcy stays on your credit report for seven years.

Filing for a Business Bankruptcy in Florida

If your business is struggling and you are considering filing bankruptcy, contact a business bankruptcy attorney at the Adam Law Group at (904) 329-7249 to discuss your options. In most cases, you can still run your business while it is in bankruptcy. If you prefer to close your business, you also have the option of filing Chapter 7 liquidation.