Frequently Asked Questions

Yes. Small businesses can file for bankruptcy protection. There are many options to help the business depending on how the business is structured and whether it will continue operating. We help business owners evaluate their options and protect assets whenever possible.

This depends on whether you personally guaranteed business debts and the legal structure of your business. Many small business owners are personally liable for business obligations, which is why a coordinated personal and business bankruptcy planning is often critical.

In many cases, yes. Certain types of bankruptcy allow businesses to continue operating while debts are reorganized or resolved. Each business situation is different and we assess viability and feasibility early in the process. 

Yes. Filing bankruptcy typically triggers an automatic stay under the federal bankruptcy laws. This immediately stops most lawsuits, collection actions, foreclosures, and creditor harassment.

A traditional Chapter 11 bankruptcy case involves extensive court filings and reporting, a creditors committee, and professional fees that can overwhelm a small business. 

Small business bankruptcy under Subchapter V:

• Eliminates many costly procedural requirements
• Reduces legal and administrative expenses
• Streamlines court oversight
• Allows plan confirmation without creditor consent in certain circumstances
• Focuses on feasibility and fairness rather than creditor leverage
• Typically reduces the time in a bankruptcy case
• Possibly eliminates the need for owners to contribute "new value" if unsecured creditors are not paid in full 

To qualify as a small business debtor, the business must have total non-contingent, liquidated debts no greater than $3,024,725. The business must be engaged in commercial activity or business operations and the majority of the debt must arise from commercial or business activities rather than personal obligations.

Merchant cash advance (MCA) loans are common and often a financially devastating problem for small businesses. These financing arrangements typically involve daily or weekly automatic withdrawals from your bank account that drain cash flow and leave businesses unable to meet payroll, rent, or vendor obligations. Bankruptcy can help address MCA debts by: 

• Stopping automatic withdrawals immediately upon the filing of the bankruptcy case
• Preventing repeated account freezes
• Challenging predatory or improperly structured MCA agreements
• Restructuring or discharging obligations where permitted
• Restoring control over operating accounts and cash flow 

No. Bankruptcy laws include exemptions that protect many essential household goods, retirement accounts, your home, and automobile. There are specific state laws that can be used to protect your assets. Our lawyers will guide you through  this process.

Common financial pressures that lead to a bankruptcy filing include:

• Foreclosure or the risk of losing a home
• Wage garnishment
• Bank account seizure or levy
• Vehicle repossession
• Eviction
• Mounting medical debts
• Unstainable credit card payments
• Student loan pressure
• Tax obligations
• Unemployment or reduced income
• Divorce or separation

There are two common Chapters for individuals seeking bankruptcy protection. A Chapter 7 bankruptcy is a liquidation type of bankruptcy in which the individual is seeking a discharge. A Chapter 13 bankruptcy is a reorganization over a 3-5-year period, in which the debtor pays into a plan to address secured, priority tax debts, and unsecured debts over time. Knowing which type of bankruptcy case to file can be rather complicated. Our attorneys can help evaluate all your financial circumstances before filing a bankruptcy. 

Chapter 13 allows individuals with regular income to reorganize their debts through a restructured payment plan between 3 to 5 years. Chapter 13 may allow you to:

• Catch up on missed mortgage payments
• Stop foreclosure or repossession
• Protect assets that may not be fully exempt under Chapter 7

Chapter 13 may also be necessary because an individual does not qualify for a Chapter 7 because of income reasons.

To properly properly prepare and file your bankruptcy case, the court requires detailed financial information including:

• Personal and Business Financial Records such as recent bank statements, pay stubs, profit and loss statements, balance sheet, and documentation of business expenses
• Tax information
•  Credit report
• Copies of lawsuits and other collection efforts
• Asset documentation such as vehicle titles, insurance policies, mortgage statements, investments, and retirement accounts

If you filed a Chapter 7 bankruptcy and received a discharge within the last 8 years, you would need to wait at least 8 years before filing a new Chapter 7 bankruptcy to be eligible for a discharge. Chapter 13 cases do not have the same type of restriction, but the timing of a second Chapter 13 case being filed can affect whether you are eligible to get the benefit of the "automatic stay" to prevent collection actions by a creditor, such as a foreclosure proceeding. 

A bankruptcy trustee is a federally appointed official responsible for overseeing your case. The trustee does not represent you or your creditors but acts as an independent party to ensure the bankruptcy laws are followed. 

The trustee's responsibilities include reviewing your bankruptcy paperwork, verifying income, assets, and expenses. The trustee as conducts a "Meeting of Creditors" (also known as a Section 341 Hearing). The trustee will also administer non-exempt assets.

Certain debts such as federal, state, and local income taxes, and federally insured student loans are presumed to be non-dischargeable. There are special rules relating to taxes and student loans that you should discuss with an attorney. 

Secured debt is an obligation owed to a creditor that has a lien on your asset. The asset is considered "collateral" to secure payment on the debt. The most common forms of secured debt are mortgage loans and vehicle loans. An unsecured debt is an obligation owed to a creditor without collateral. Typically credit card debts and medical debts are unsecured. Secured debts and unsecured debts are treated differently in bankruptcy proceedings. 

Estate planning is a person's effort to make arrangements for their loved ones in advance of their death. Estate planning avoids having a probate court try to guess a person's intention if they do not have a will or trust in place. Estate planning can include a will, trust, power of attorney, living will, and health care power of attorney. 

Many people are motivated to create an estate plan when they get married and/or have children. However, it is beneficial for everyone to have an estate plan in place to establish a person's intentions relating to inheritance and end of life planning. 

When a person dies, certain assets may automatically transfer to named beneficiaries under a life insurance or investment account. Other assets may transfer outside of probate court, such as joint and survivorship real estate or property recorded to transfer on death. All other property is generally transferred through a probate court proceeding. The probate court has the authority to transfer assets that are identified in a will. Without a will, the court must rely on some default rules of inheritance.