In the past, many struggling small businesses were forced to file a Chapter 7 Liquidation Bankruptcy (leaving business owners without a livelihood, workers unemployed, and creditors unpaid) because they could not afford a Chapter 11 Business Bankruptcy Reorganization. A standard Chapter 11 Business Bankruptcy Reorganization often takes a long time, has high costs, and requires a large infusion of new capital by the owners in order to retain equity. However, effective as of February 19, 2020, the Small Business Reorganization Act (SBRA) created a new category of Chapter 11 business bankruptcy options, called Subchapter V, which is designed to make it more feasible for small businesses to use the bankruptcy process to reorganize, which should give many more small businesses a chance to survive.
For additional information about the different Chapters of Bankruptcy, including Subchapter V, and the eligibility requirements for each Chapter, please see our Small Business Bankruptcy Options page.
CAFE does not currently represent Beneficiaries in bankruptcy matters directly, however, if you have additional questions or would like a referral to a bankruptcy attorney, please fill out our intake form.
Closing a business that has been an entrepreneur’s passion can be a heart wrenching and difficult decision. For companies with overwhelming debt, a Chapter 7 Bankruptcy may be the only option, however, for other companies, a negotiated dissolution can be a viable less expensive option. Unfortunately, many entrepreneurs shortchange the actual dissolution process. It takes more than simply laying off workers, ending a lease, and negotiating debt payments to legally close a business, and when the legal requirements are ignored, liability can build up quietly over time and come back later to hurt business owners, potentially putting their new ventures or retirements at risk.
If you want additional information or help dissolving a business, please fill out our intake form.