Small Business Bankruptcy
Small Business Bankruptcy Attorney in Portland, Oregon
Almost everyone experiences financial trouble at least once in their lives. Unfortunately, even US small business owners are not spared from going through a financial crisis. Sometimes you have to cut back on unnecessary expenses, apply for small business loans, or work extra hours to keep your business afloat. This can sometimes leave you feeling overwhelmed and exhausted, leading you to think that maybe, it is time to apply for small business bankruptcy.
There are different types of bankruptcy in the US for small business owners struggling with debt: Chapter 7, Chapter 13, and Chapter 11 Bankruptcy. These bankruptcy chapters have their advantages and disadvantages, so it is essential to know which type of bankruptcy would work best in your situation. Call 503-694-4445 to talk to an experienced Portland bankruptcy attorney to help you with your case.
Chapter 11: Business Reorganization
Chapter 11 is another type of bankruptcy option for small businesses. Many small business owners avoid Chapter 11 because it is usually risky, expensive, and complex. However, Chapter 11 is excellent for your business if you have plans of restructuring and continuing your business operations, primarily if your business is owned by a partnership, corporation, or a limited liability company.
Under Chapter 11, the company will file a detailed plan of their reorganization that shows how they plan to deal with their creditors. They can terminate leases and contracts, recover assets, repay some of their debts or discharge them to turn them into profit. They will then present this reorganization plan to their creditors and the bankruptcy court for approval.
Chapter 11 is also great for individual business owners who want to reorganize their debts but have too much debt to qualify for Chapter 13.
Chapter 11: Subchapter V
In 2019, the Small Business Reorganization Act of 2019 was passed by the US Congress and signed into law by the US President. The act became effective on February 19, 2020. This created a new subchapter V of Chapter 11, making filing Chapter more affordable and more accessible because of its more straightforward procedure. Under the Bankruptcy Code, “small business debtors” can file under the new subchapter.
If you’re considering getting a Chapter 11 bankruptcy, consult with a Chapter 11 bankruptcy attorney in Portland. An experienced attorney will help you evaluate your case and decide whether Chapter 11, Subchapter V is best for your case.
Chapter 13: Debt Reorganization
In Portland, Oregon, a small business owner can use Chapter 13 to declare bankruptcy if their goal is to reorganize their debts instead of liquidation. It will allow you to keep your assets and properties while reorganizing your debts and paying off a portion or all of your debts through a debt repayment plan that would usually last for three to five years. You’ll be required to make payments to the bankruptcy trustee assigned to you by the bankruptcy court, and the trustee will then forward your payments to your creditors to pay off your debts.
The amount you have to pay back will depend on the amount of debt you have, your income, and your expenses. However, certain debts, called priority debts, must be repaid in full regardless of how much you earn. This can include child support and alimony payments, taxes, etc.
A Chapter 13 bankruptcy is a type of reorganization bankruptcy typically for individuals. However, there’s a workaround here so sole proprietors with small businesses can use it to file for bankruptcy.
For instance, you own a small pet supply store, and you’re falling behind on payments for your rent and bills. When you declare bankruptcy, you can file under your name instead of your business’ name and reorganize your business and personal debts. Unlike companies and corporations, this can work because a sole proprietorship isn’t a separate legal entity. A sole proprietor is responsible for both consumer debts and business debts.
If you think that your business would benefit from a Chapter 13 bankruptcy, our experienced Portland bankruptcy attorneys can help you file for Chapter 13 bankruptcy.
Chapter 7: Liquidation Bankruptcy
Small business owners, especially sole proprietors, would greatly benefit from filing a Chapter 7 bankruptcy. This could help you save your business or present a simple way of closing it down. Also known as liquidation bankruptcy, chapter 7 is used when your business’ debts become so overwhelming that you’re unable to pay them even by a debt reorganization plan. A liquidation bankruptcy can be used for sole proprietorships, partnerships, or corporations.
If you’re a sole proprietor, you and your business are as one. If you file for Chapter 7 under your name, all your qualifying debt will be discharged, including the debts acquired from your business.
You can also protect your personal and business assets through bankruptcy exemptions. So when you file for Chapter 7, you can wipe out all dischargeable debts and continue operating your business.
If a business doesn’t have any substantial assets, declaring a Chapter 7 bankruptcy would be best. However, before a Chapter 7 bankruptcy can be approved, you must first pass the “means” test. If your income exceeds the standard income accepted in Chapter 7, your application won’t be approved. But if you have more business-related debts than personal debts, then you don’t have to worry about passing the means test. To know if you qualify for a Chapter 7 liquidation bankruptcy in Portland, Oregon, seek the legal assistance of an experienced Portland Chapter 7 bankruptcy attorney.
Consult with a Portland Bankruptcy Attorney Today!
Small business bankruptcies can be complicated. If you’re struggling to keep your business afloat, seek legal advice from an experienced Portland small business bankruptcy attorney.
At Michael D. O’Brien & Associates, P.C., we have bankruptcy attorneys who can help you in the early process of your bankruptcy case. We serve small businesses in Portland, Tigard, Bend, Clackamas, and nearby communities in the Oregon area.