If you are a small business owner or its president, and are considering a Chapter 7 or Chapter 11 Commercial Bankruptcy, you should understand how difficult this process can be. You should carefully review the changes in the law with your attorney, for example, on October 17, 2005 “The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005” made it much tougher for consumers filing bankruptcy, and it also caused many complications for small businesses attempting to file bankruptcy.
A small business, under this Bankruptcy law is defined as any business with $2,000 in debt or less. Here are a few of the provisions that will make filing a Chapter 7 or Chapter 11 Commercial Bankruptcy much riskier for a small business.
- There are significantly more reporting requirements and additional paperwork.
- Your books will be examined by the Bankruptcy Trustee to ensure your company has a plan to succeed. If the trustee determines the company does not have a good chance of surviving, he/she can move the case from a Chapter 11 to a Chapter 7.
- Sole Proprietors may now be forced to file corporate bankruptcy protection as individuals if the bankruptcy judge determines that most of their commercial debt is personal.
- The time period for a company to decide whether to keep or reject it’s non-residential real property lease changes to 120 days. Previously, filers could extend the current 60-day deadline many times, sometimes drawing out the process for a year or more
Commercial bankruptcy is now a less desirable option for many small to medium sized businesses that carry high amounts of debt and with the red tape imposed by their creditors trying to collect, this process can be unbearable. Fortunately, there are alternatives for the small business owner to consider.
The above paragraphs are INFORMATIONAL and not ADVISORY in any capacity or manner. For legal advice concerning the different types of bankruptcy, and bankruptcy in general, please contact your bankruptcy attorney. However please note, WE CAN PREVENT BANKRUPTCY.