As the history of the COVID-19 pandemic continues to be written, one or more chapters will cover the impact on businesses, both small and large. The tale is two-fold: companies that survived and enterprises that failed, despite billions in forgivable loans courtesy of Washington DC lawmakers.
According to the Harvard Economic Tracker, more than one-third of the small businesses numbering more than 23 million, experienced temporary or permanent closure.
A cataclysmic impact on businesses
Small businesses are organizations with less than 100 staff members. They accounted for 98 percent of all companies forced to close due to a worldwide pandemic based on data from the US Small Business Administration.
Regardless of the struggle businesses face on a daily basis, many times, bankruptcies are a business owner’s only option to get out from under.
Difficult choices
The type of bankruptcy a business owner selects comes from various factors ranging from the specific entity to the liability for debts. Also, owners have to decide to keep operations open and strategies moving forward to ensure stability and hopeful success.
Options include:
- Chapter 7 – An option ends the business as assets are liquidated. Business owners surrender nonexempt property that the trustee will sell. Subsequently, the proceeds go to creditors. Certain exemptions involve home equity, vehicles, furniture, and clothing. Benefits include no means test, no liability for business debts, and a shorter process lasting up to six months.
- Chapter 13 – Similar to consumer bankruptcy, businesses that maintain revenue can request a repayment plan spanning three to five years. Once completed and provided that filers are current with debts, the remainder is discharged and continue operations without court oversight.
The dream of starting and operating your own business is a dream come true for many entrepreneurs. However, when challenges arise, falling revenues can become a nightmare, often requiring the help of an experienced bankruptcy attorney.