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Filing A Restaurant Bankruptcy

As Covid-19 rages on and restrictions for public gatherings ramp up, restaurants in Charlotte and the surrounding area—as well as the country—continue to feel the pain. Many restaurant owners indicate they are at a breaking point financially. During a time when sales are supposed to be highest and restaurants can make up for slower months, the exact opposite is happening.

We speak with small business owners every day regarding their financial predicament. This of course includes restaurant owners. What many small business owners are surprised to find out is that filing a restaurant bankruptcy can be the secret ingredient to future success.

Your Business Can Continue

The options in bankruptcy for restaurant owners have increased with the Small Business Reorganization Act. Together with Chapters 7, 11, and 13, most restaurant owners can find a bankruptcy solution that fits their particular needs.

The primary decision you will need to make is whether the business is going to continue to operate. If it is not, your bankruptcy lawyer will assist with the dissolution of the business in conjunction with the bankruptcy filing. If the business is going to continue, it can do so under either a Chapter 7, 13, or Small Business Reorganization. Chapter 11, an expensive bankruptcy option, is not usually required for a restaurant that is filing bankruptcy.

A recent article in the Philadelphia Inquirer makes specific mention of the concerned business owners have regarding continuing operations. Particularly, the article addresses the concern regarding dealing with suppliers. Typically, suppliers will continue to work with you; however, they may require you to pay COD until you prove yourself with them over time.

You Can Protect Your Assets

The bankruptcy code allows for assets to be exempted from creditors. The ability to preserve assets is different depending upon the Chapter you are filing, and your bankruptcy lawyer will work with you to determine your asset exemption needs when strategizing which bankruptcy route to take.

There are some assets that are exempt from creditors in bankruptcy in an ‘unlimited’ amount—401k and retirement savings, for example—so it is important to speak with a bankruptcy lawyer before you start depleting those assets to keep your business running outside of bankruptcy.

Speak With A Charlotte Bankruptcy Lawyer Today

If you own a small business or restaurant, we are here to help. Speaking with someone about your options not only helps ease the anxiety and fear you are feeling, but also provides you with clear direction regarding your options. We know you have put your life into the business; bankruptcy can help you save it.

To speak with an attorney, call 704.749.7747 or click HERE to request a phone consultation. All consultations are free and can be conducted over the telephone.

Small Business Bankruptcy

Filing a small business bankruptcy in North Carolina will relieve you of your personal obligations on business debt. Your business entity will still be liable for the debt. As a result, for most small businesses, a Chapter 7 or Chapter 13 combined with a dissolution of the corporate entity, will accomplish your goal of eliminating both personal liability and business liability. After bankruptcy, most small business bankruptcy clients are able to start a new small business under a different name.

Despite what you’ve read about filing business bankruptcy under Chapter 11, our clients often accomplish the same result through a personal bankruptcy by filing a Chapter 7 or Chapter 13 bankruptcy, and dissolving the small business. This saves you thousands of dollars and you are rewarded with the same result– you are free from your obligation under the small business debt.

Personal Liability In Small Business Bankruptcy

When most small business owners take on business debt, they sign as an officer or member of the small business, and then again personally. This guarantees the lender that either the business or the individual will repay the debt. This is why simply dissolving the business will not eliminate the debt from your life—you’re still on the hook personally. This means creditors for the business can come after your personal assets: home, vehicles, savings, etc.

Business Assets and Liabilities

When you file a personal bankruptcy and include business debt, you’ll also need to provide income and loss statements for the business for the year prior to filing. Your Charlotte bankruptcy attorney can assist you with putting these together, if an accountant has not already done so. You’ll also need to list all assets and debts of the business.

Dissolving The Company

Dissolving an LLC or other small business entity eliminates the potential for creditors to pursue the company for debt—the company no longer exists. If you file a personal bankruptcy in combination with the dissolution, you relieve your personal liability. In essence, you’ve filed a small business bankruptcy by filing personally. If there are assets of the company which need to be addressed, our firm can assist with contacting creditors in compliance with The North Carolina Business Corporation Act.

Starting Another Business

Filing a small business bankruptcy does not prevent you from starting a new business. You’ll be subject to the same approval process if you need to take on debt to get the business started, and your personal bankruptcy may be a hurdle from a credit perspective. But entrepreneurs are creative and often find funding outside of traditional means to get new businesses started.

Call today if you have questions about your small business, small business bankruptcy or personal bankruptcy. The consultation is free, and we’re here to help. We can be reached at 704.479.7747. Or, you can click HERE to request a free consultation.

Filing A Small Business Bankruptcy

Filing a small business bankruptcy in North Carolina is an endeavor which will relieve you of your personal obligations on business debt. For most small businesses, a Chapter 7 or Chapter 13 combined with a dissolution of the corporate entity, will accomplish your goals.

While Chapter 11 is designed for traditional business bankruptcy filings, it is an expensive bankruptcy option that costs debtors tens of thousands of dollars. There are times when a Chapter 11 is the appropriate avenue for a corporate entity to enter into bankruptcy and continue to do business. More often, in a small business bankruptcy setting, a Chapter 7 or Chapter 13 will serve to meet your goals, and save you thousands of dollars.

Debt With A Personal Guaranty

As part of preparing for bankruptcy, you must review your debt obligations with the help of your bankruptcy attorney. Specifically, it is important to distinguish between debt which is to the corporate entity only, and debt which includes a personal guaranty. The dissolution of the corporate entity serves to relieve the corporate entity of the obligation on the debt; the personal bankruptcy filing will serve to address the personal guaranty.

Anti-Bankruptcy Clauses In Contracts

Many corporate debt contracts contain language specific to bankruptcy. Those contracts often dictate that a bankruptcy filing will not serve to relieve the personal guaranty or other obligations to repay the debt. While this language is freely entered into by both parties signing the contract, courts have rules it to be in conflict with public policy. Our firm will defend any challenges to the discharge of your corporate debt, specifically challenges premised upon an anti-bankruptcy clause.

Profit and Loss Statements

Qualifying for Chapter 7 requires a thorough review and disclosure of your income for the 6-month window prior to the filing. When operating as a small business, debtors are typically not paid as W-2 employees. LLC members and partners take draws and often those draws differ dramatically from month to month, depending upon the profitability of the business. Additionally, while bankruptcy is available for debtors who qualify from an income perspective, you must demonstrate to the bankruptcy court your income, as defined by the bankruptcy court. This necessitates the submission of a profit and loss statement showing actual gross income, less actual expenses. Our firm will guide you through this process. We can help to create your profit and loss statement or advise a third party—typically an accountant—who you might retain to prepare it for you. For small businesses which have not had much income over the 6-12-month window prior to filing, often the profit and loss statement is easily created.

Call For A Consultation

We know the stress of running any small business. When you’re facing financial difficulties, it can be overwhelming. We’re here to help. Call us for a free consultation at 704.749.7747 or click HERE to make a simple request to be contacted. We will reach out to speak with you or schedule a time to speak. Your financially recovery is right around the corner, and we hope you choose to Recover With Us.