MESA, AZ BUSINESS BANKRUPTCY ATTORNEY
Commercial Debt Relief Guidance Serving Gilbert, Mesa, Phoenix & Queen Creek
Running a business can be immensely rewarding but also enormously challenging. Economic turbulence can put businesses from all types of industries in difficult and vulnerable financial positions.
Filing for Chapter 11 bankruptcy allows you to retain control of your company and restructure business debts. If you are winding down a venture and wish to dissolve your company, Chapter 7 bankruptcy can facilitate the process by liquidating business assets and repaying creditors.
Our Mesa, AZ business bankruptcy lawyer at D.M. Bankruptcy Law Group, LLC can help you understand the full extent of your company’s debt relief options. We understand the intricacies and nuances of the Bankruptcy Code and have strong relationships with the Arizona Bankruptcy Court and Trustees. Our experienced team can leverage our knowledge and resources to benefit your case and deliver the relief your company needs.
Schedule a free initial consultation to explore how we can help your business overcome debt. Call (480) 842-8786 or contact us online today!
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When you choose D.M. Bankruptcy Law Group to represent your case, you will work directly with Attorney Dutkiewicz. He is available after typical working hours to make sure he can answer all of your questions and be there whenever you need him.
How Does Chapter 11 Bankruptcy Work?.
If you intend to keep your company afloat but are struggling with financial difficulties, filing for Chapter 11 bankruptcy can help you reorganize your debt and create a plan to move forward. When you file for Chapter 11 bankruptcy, you retain control of your business. All damaging collection actions must stop, meaning your company will be temporarily protected from collections lawsuits, property seizures, bank levies, foreclosures, and more.
You will continue to be able to manage the day-to-day operations of your business as you move through the Chapter 11 process. No Trustee will take control of your assets.
After filing for Chapter 11 bankruptcy, you will need to submit a complete disclosure of your company’s financial circumstances to be reviewed by the court and your creditors. This disclosure must be accurate and exhaustive, as creditors can register objections – which requires expensive and time-consuming litigation to resolve – if they feel the disclosure is inaccurate or omits key details.
You will also need to file a Chapter 11 plan that addresses how the company plans to pay all of its obligations moving forward. This plan must be feasible, proposed in good faith, and be in the best interest of your creditors.
Your plan may involve altering the agreement terms of certain loans while discharging certain other debts. The plan will also need to take into account your current operations and could include some downsizing to reduce overall expenses.
Creditors can also object to a Chapter 11 plan, but the Bankruptcy Court may in some circumstances choose to overrule them. If everyone agrees on the terms of the plan, it is enacted immediately, and any included debt discharges will immediately take effect. In situations where the Court overrules creditors, the business must complete all payment terms before any discharges are authorized.
If you are unable to propose an adequate plan within your “exclusivity period” – typically up to 18 months after filing your petition – creditors can choose to propose their own plan. This could involve liquidating some or all of a company’s assets, so you must make every effort to avoid this outcome.
Navigating a Chapter 11 bankruptcy is rarely an easy endeavor. Our experienced team can help you efficiently move through the process and work to overcome any obstacles that may arise.
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ARE THERE CHAPTER 11 OPTIONS AVAILABLE FOR SMALL BUSINESSES?
Yes. Subchapter V of Chapter 11 was recently introduced and offers an expedited bankruptcy reorganization process to small businesses.
Your company may be eligible to file for Subchapter V as a small business if:
Your business debt does not exceed $2.75 million
At least 50% of your business debt is tied to business-related activities
Your company does not consist of owning and operating a single real estate property
Subchapter V bankruptcies offer several key advantages over traditional Chapter 11 bankruptcies. You will still retain control of your business, but a Trustee will be appointed to monitor day-to-day activities and provide suggestions for the reorganization plan. You will not have to pay all administrative expenses associated with Chapter 11 bankruptcy up-front and can instead pay in installments. You will not need to file a disclosure, and you will not necessarily need creditor approval to confirm your plan.Perhaps most critically, only you, as the business owner, can file a reorganization plan proposal in a Subchapter V bankruptcy. Creditors cannot under any circumstances submit their own plans. We can determine if your business qualifies under Subchapter V and guide you through the process.
How Can Chapter 7 Bankruptcy Help Me Dissolve My Business?
Some business entities are not intended to last forever. Others may run their course, and you may wish to exit a venture to pursue other commercial opportunities.
Corporations and limited liability companies (LLCs) may be eligible to file for Chapter 7 bankruptcy, a process that results in the effective dissolution of the filing company. When a business files for Chapter 7, the company will cease operations. A bankruptcy Trustee will be appointed to oversee the case, and they will liquidate all of the company’s remaining assets. No exemptions are available in a Chapter 7 business bankruptcy: Every available asset will be liquidated, and the proceeds will be used to pay outstanding obligations.
Once all company assets have been liquidated, all remaining business debts will be discharged. The business entity will not owe any other outstanding debts, even if creditors were not fully compensated from the proceeds of the liquidation process. In the rare event that there are sufficient funds to entirely pay off a business entity’s debts, the company owners will receive and split any surplus.
Chapter 7 bankruptcy can be an effective and efficient means of shutting down a company and settling remaining debts. However, the process does come with some caveats. It is not typically a practical choice for partnerships, as the process does not eliminate the personal liability of the partners. The bankruptcy Trustee may even attempt to sue partners to collect monetary assets as part of the liquidation process.
Business owners are also not permitted to file for Chapter 7 bankruptcy on their own. You must hire a licensed legal professional. Our Gilbert, AZ business bankruptcy attorney can serve as your guide and advocate throughout this complex process.
Will Filing for Chapter 7 Business Bankruptcy Eliminate My Personal Liability?
No. When a business files for Chapter 7 bankruptcy, the process does not erase any personal liability of the entity’s owners. Most types of business entities – including LLCs and corporations – are built to protect owners from personal liability, so this may not be a factor in your case.
If you are liable for LLC or corporate debts, you will still be responsible for those debts once your business has completed its Chapter 7 bankruptcy. You will need to either file a separate, personal bankruptcy or attempt to negotiate a debt settlement. Fortunately, our team can assist you with both remedies.
Do One-Owner Business Entities Need to File for Business Bankruptcy?
It depends. If you are the only owner of an LLC or corporation, it may make more practical sense to skip a business bankruptcy and instead file a personal bankruptcy. Because you are filing a personal bankruptcy, any personal debts will be discharged once you have completed the liquidation process. Your bankruptcy Trustee will also likely choose to seize control of your business entity and liquidate its assets as part of the personal bankruptcy. We can help you explore this strategy.
Can a Business File for Chapter 13 Bankruptcy?
In most cases, no. Chapter 13 bankruptcy is reserved for individual filers and cannot generally be used by business entities. However, certain types of business entity types can leverage Chapter 13 bankruptcy through a business owner’s personal filing.
Sole proprietorships can benefit from Chapter 13 bankruptcy because they are not considered separate legal entities. The business owner – or the sole proprietor – simply files for Chapter 13 bankruptcy and reorganizes both their personal and business debts as part of their repayment plan.
Partnerships can also sometimes file for Chapter 13 bankruptcy, but doing so is not generally advisable. Partnership agreements often contain provisions that automatically dissolve the business in the event that any individual partner files for bankruptcy. This is done to protect the non-filing partners whose assets might otherwise become vulnerable in a bankruptcy scenario.
If you are a sole proprietor, we can evaluate whether filing for Chapter 13 bankruptcy makes sense for you and your business. If you participate in a partnership, our firm can help you explore all available debt relief options.
Our Gilbert, Arizona business bankruptcy lawyer at D.M. Bankruptcy Law Group LLC can provide the experienced guidance your company needs to succeed. We serve clients in Gilbert, Mesa, Queen Creek, Phoenix, and the surrounding Arizona Cities.