Running a restaurant has its good times and bad. In the last year or so, the economy has been struggling. For many restaurant owners, this has meant an immense amount of financial pressure.
As a small business owner, you may be interested in finding out more about what you can do to get out of debt and if bankruptcy could be beneficial to you as you wait for the economy to recover. The good news is that there may be options to help.
To start with, there are two main kinds of bankruptcy that small business owners use. These are Chapter 7 bankruptcy and Chapter 11 bankruptcy. Chapter 7 is liquidation-based, meaning that the business will close its doors. Chapter 11 is a type of reorganization bankruptcy, which allows businesses the time needed to restructure and find a way to become profitable despite a heavy debt load or low profits.
Which kind of bankruptcy is right for your business?
The type of bankruptcy you want for your business will vary based on your goals. Do you want to stay open or are you willing to shut your doors? If you want to close your restaurant and walk away, then Chapter 7 bankruptcy may be a good option. It gives you the opportunity to liquidate your business assets and to have the remaining debts discharged.
Another option is Chapter 11 bankruptcy, which allows you to reorganize your debts. Chapter 11 bankruptcy allows businesses to stay open and operating. While in a Chapter 11 bankruptcy, you may downsize or reorganize your business in one of several ways. Once you decide on a plan, creditors will need to approve. If they do, then you’ll work on that plan and eventually emerge from this bankruptcy still open and, hopefully, profitable.
Every business is different, so it’s impossible to say which of these is the right choice for you without looking at all of the financial factors that are present. Your attorney can go through your options with you to help you decide if you want to remain open and if it’s feasible to keep your business operating in the future.