Many small businesses will take advantage of Paycheck Protection Program (PPP) and other measures to keep afloat for the next couple months. These plans hopefully will result in forgiveness of any funds used for payroll, rent and utilities. But as we all knows, running a small business involves lots of other expenses. Many businesses will draw down lines of credit while credit is still available. Seeking forbearances for various business expenses may also be possible to conserve cash. Owners may not take paychecks for awhile.
But eventually, shelter in place orders will subside. What then? Revenues won’t be what the once were for quite some time: at least for the entertainment, travel and restaurant industry. Many other industries too I’m sure.
How will these businesses remain in business? Fortunately, the new Subchapter V Small Business bankruptcy rules went into effect in mid-February. These weren’t caused by COVID-19, but the timing couldn’t have been better. The debt cap was raised by the CARES Act from $2.7 million to $7.5 million for eligibility. These small business Chapter 11 cases are streamlined and less expensive. They are a means to reduce debt and the cost of carrying that debt — while remaining in business!
What are the upsides of this approach? There are several: no creditor committee, only the debtor can file a plan, nor quarterly trustee payments, and no disclosure statement. These terms may mean nothing to the average business owner, but they mean everything to a bankruptcy attorney and can lead to a successful bankruptcy. This all means that a case can be resolved fairly quickly for small businesses trying to recover after we stop sheltering in place. It is not a personal bankruptcy for an individual, but rather a restructuring and elimination of certain debts for a business.
Our attorneys have years of bankruptcy experience, including Chapter 11 cases. One of our attorneys has an MBA and her on the ground experience has helped many businesses over the years get back on their feet.
Our goal is to help our community not only survive COVID-19 but thrive in a new environment whatever that may look like.