8 Questions about filing a small business bankruptcy

 

2020 has been one unpredictable year. With supply chain disruptions all over the globe and intermittent lockdowns affecting different areas of the world at any given moment – it has become exceptionally difficult to operate a small business.

With this in mind, we put together a list of questions most people ask when it comes to filing for bankruptcy. But don’t forget that you can contact a lawyer directly if you want to delete your debt.

The questions to ask when filing a bankruptcy for your small business

Here are some of the best things to ask before and during your filing for bankruptcy.

1 – Do I have any other options?

A – You might be able to renegotiate ways to pay off your lenders if you contact them first. You may also be able to wait out the pandemic by deferring payments or by paying the minimum amounts in the meantime. Your third option is bankruptcy, and this is usually undertaken as a last-ditch effort. Small business owners love their businesses. Nobody wants to have to shut their doors.

2 – Should I try and get more credit?

A – It isn’t a good idea to get into any more debt. We do, however, advise that you contact your bank or lender. Some of them have set up hardship programs in light of current circumstances, which should allow you to put debt recovery on hold for now. This might help you to wait out the Coronavirus in the hope that business will pick back up again soon.

3 – What about alternative financing?

A – You might be able to get alternative lending from other people which could potentially see you through another few months. Whether or not to opt for the likes of invoice financing, unsecured loans, peer-to-peer lending, or even crowdfunding, is up to you. Well your business still be relevant after the pandemic should working from home be the new normal? If so, hang on in there. 

4 – Can anyone protest my bankruptcy claim?

A – No, if you decide to file for bankruptcy it is unlikely that anyone will try to prove that you have money. You will, however, have to prove that you can no longer pay your debts.

5 – Should I liquidate my business or reorganise it?

A – The United States laws allow you to file for bankruptcy as a small business under Chapter seven of U.S. Bankruptcy Code. However, it also gives you the option of liquidating assets, or reorganising your company under Chapter 11. If you choose to reorganise you may be able to save your business.

6 – My business partners live abroad… Can I still file?

A – Yes. In this case, you will have to file under Chapter 15 of U.S. Bankruptcy Code. This will account for one partner being out of the country.

7 – Should I contact a lawyer?

A – Absolutely. In fact, we recommend finding a lawyer as one of the first things you should do. They can help you understand what is best for your unique situation.

8 – I’m overwhelmed by the paperwork – what do I do?

A – asides from calling in a lawyer, ensure that you use the forms numbered from the 200 series when filing for bankruptcy on behalf of your small business if you’re anything other than a sole trader. If you are the sole proprietor to your business, you will use the forms of the 100 series.

Conclusion

We hope we have provided at least some clarity into how your small business should file for bankruptcy in the USA. Remember to call in a lawyer to guide you safely through the rest of the process.

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