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Navigating Small Business Challenges: The Role of Chapter 11 Bankruptcy

Tallahassee, Florida 

Chapter 11 Bankruptcy Options 

As an experienced business owner, you’ve navigated countless decisions and handled an array of challenging questions. You’re not one to shy away from thorough research or seeking advice from trusted sources. At Michael H. Moody Law, P.A.; we recognize that the journey of business ownership can often resemble a rollercoaster ride, especially when it comes to making critical financial decisions. For some business owners, unforeseen circumstances may arise, leaving them in need of financial assistance from sources like the Small Business Administration (SBA) or Merchant Cash Advance lenders. Others may find themselves grappling with issues such as mounting bills, declining revenue over the years, or the difficult decision to wind down their business and liquidate assets. In such situations, Chapter 11 Bankruptcy can emerge as a powerful financial tool to guide you through this intricate process.

What is Chapter 11 Bankruptcy?

Before diving into how filing for bankruptcy can help your small business, let’s first understand how Chapter 11 Bankruptcy works. Within Chapter 11 there are generally two paths for business owners, depending on the amount of debt of the business. In 2020, the Small Business Reorganization Act of 2019 was enacted. The SBRA enacted a new Subchapter V of Chapter 11 of the Bankruptcy Code. If you own a business, and your debt is below $7.5M, you can qualify for Chapter 11 Sub V. This debt limit is to expire in June of 2024.

At Michael H. Moody Law, P.A., we first, we look at your debt total to determine if you are eligible for Chapter 11 Sub V. Chapter 11 Bankruptcy gives business owners the opportunity to regain financial security while continuing normal business operations. If you are a business owner that truly believes in your company and where the business is going but is struggling with an enormous amount of debts, Chapter 11 is a wonderful tool for you.  The process allows you to remain in control and to determine your path going forward.

Chapter 11 Sub V offers a more affordable, expedited form of bankruptcy where business owners can eliminate guarantee liability, right-size business debts, eliminate all or part of liens and claims, and reorganize businesses so that they can thrive going forward.  The process also offers a way for business owners to discharge debts while selling all or part of their businesses and assets. In particular, SubV offers a path to eliminating loans and guarantee obligations owing to the Small Business Administration and Merchant Cash Advance lenders.

Filing Chapter 11 Bankruptcy provides business owners 

  • Relief from Debts – Chapter 11 Bankruptcy immediately grants business owners much-needed breathing space, free from the pressure of creditors knocking at your door.. This “breathing” room allows you to reorganize your business debts and gives you the opportunity to create a more successful business plan. 
  • Restructuring the Debt – Chapter 11 bankruptcy provides the debtor an opportunity to look at all contracts and business related deals to negotiate better terms that allows your business to continue future growth. 
  • Automatic Stay from Creditors – The bankruptcy protection from creditors is called the Automatic Stay. It’s like a government body of armor covering your business while in bankruptcy. The Automatic stay prohibits creditors from continuing with any legal action in collecting debt while in bankruptcy.

When do you know filing bankruptcy is best for your small business? 

   The highs and lows of business operating can cause numerous obstacles for you as the owner. The list below are reasons why clients call us to discuss filing Chapter 11 and Chapter 11 Sub V for small business. 

  • Business Debt is too high
  • Sued/lawsuit pending
  • Partnership Dispute
  • Tax Debt 
  • Non-performing/rejecting a contract or a lease
  • Selling the business (all or part of it) 
  • Discharging guarantee debt/liability 
  • Eliminating Merchant Cash Advance Loans 

When considering filing Chapter 11 Bankruptcy for your business remember it’s not the end of the road for your business but an opportunity to turn the business towards a healthier path for the future. Chapter 11 bankruptcy is a complex legal code and requires deep knowledge of the Bankruptcy Code to successfully guide the business through the process. Michael H. Moody has over 15 years in the North Florida Bankruptcy Court system and a comprehensive knowledge of the U.S Bankruptcy Code.   We at MHMP, are here to guide you through your bankruptcy decisions. Give us a call today to set-up your free consultation. 850-739-6970