As you read this blog, the Dow Jones Industrial Average continues to drop. Small businesses, particularly restaurants, clubs and bars, are being shuttered daily. Workers are being sent home, perhaps being laid off, by the thousands. As one would expect, extraordinary financial issues will follow, as surely as night follows day. To that end, the US bankruptcy system will be a major player in the economic fallout and the recovery that is sure to come.
Many medical experts say that physical recovery from the coronavirus may take as long as 4-6 weeks. In comparison, the economic recovery will take months if not years. What is going to happen to the average American worker who has to miss 4-6 weeks of work? What will happen to small businesses, particularly in the hospitality industry, if forced to close their doors for 8-12 weeks, if not longer? Virtually everyone, from large corporations to individuals, are going to feel the effects of the pandemic, either physically or financially. Closed businesses and unemployed workers mean missed lease payments, car payments, mortgage payments, and the like. This is when bankruptcy protection becomes crucial.
For businesses, Chapter 11 is a type of bankruptcy that allows the reorganization of business affairs, debts, and assets. Businesses generally file Chapter 11 if they require time to restructure their debts. Most likely, you’ve heard about a major corporation filing for bankruptcy, but it’s not just the big players that file. Small businesses and sometimes even individuals file also.
For Chapter 11 debtors, either individually or more likely a business, a Chapter 11 case will protect the business and company’s assets while we negotiate new terms with creditors. It is also a way to position the company to be sold, sell assets, or to conduct an orderly liquidation. Whatever your particular situation, Chapter 11 will protect your business from creditors and keep your business operating until such time as new terms can hopefully be renegotiated.
As for individuals, when a person falls behind on house or car payments, Chapter 13 is a great way to help catch those payments up. For example, let’s say a person misses 8-12 weeks of work because of sickness or layoffs, and the mortgage company begins foreclosure proceedings. With Chapter 13, we can create a plan to catch up the house payments and stop the foreclosure. Hearn Law Firm can also do the same things for cars. If a person is being threatened with car repossession, Chapter 13 can stop the repo and allow a person to pay for the car through the Chapter 13 plan.
Finally, Chapter 7 is an option for extreme situations of financial distress. For a person who might get overloaded with medical bills, Chapter 7 may be the best option. With Chapter 7 bankruptcy, you can eliminate all of your unsecured debt if you qualify.
In conclusion, if you are a small business, particularly one in the hard-hit hospitality industry, or an individual struggling with economic hardship due to illness or layoff, call Hearn Law Firm today to discuss your options in bankruptcy. We can be reached 24 hours a day, 7 days a week, at 601-720-3541.