- January 22, 2024
- Kelvin Birk
- Bankruptcy
Whether due to declining sales, increased business competition, or difficult economic headwinds, unforeseen circumstances can leave business owners struggling with mounting and unmanageable debt. Creditors may be calling, and banks are pressuring you to repay loans. If this sounds like your situation, it may be time to declare a business bankruptcy. Rather than being a discouraging end to your business, bankruptcy can actually provide a fresh start for you and your family. Whether you dissolve the business altogether or simply restructure its debt, there are multiple bankruptcy options to explore, and an experienced Missouri bankruptcy lawyer can help guide and support you throughout the entire business bankruptcy process.
How to Declare Business Bankruptcy – Steps to Take
Is bankruptcy right for you, or are there some other debt-relief solutions that might be better? The first thing to do is to thoroughly evaluate your company’s financial standing by assessing assets, liabilities, income, and expenses. A consultation with a Missouri bankruptcy lawyer who understands accounting can help you do so and decide whether bankruptcy is your best option.
If you decide to declare bankruptcy, you should take the following steps:
- Determine which type of bankruptcy to file: In Missouri, federal bankruptcy law governs all business bankruptcy proceedings. The common chapters of bankruptcy include Chapter 7 (liquidation), Chapter 11 (reorganization), and Chapter 13 (individual reorganization). Whether you liquidate your business or restructure debt while continuing day-to-day business operations, your business debt can be discharged, reclassified from secured to unsecured, or financial terms and rates can be updated and changed. Your attorney can help you determine which is the most suitable bankruptcy chapter for your specific circumstances. Choices include:
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- Chapter 7: An individual, a partnership, or a corporation or other business entity may qualify for Chapter 7 bankruptcy {11 U.S.C. §§ 101(41), 109(b)}. Chapter 7 can also be used by corporations or limited liability companies (LLCs) that are going out of business and want an orderly business liquidation. Chapter 7 for businesses does not include a discharge of debts, as businesses that no longer exist typically have no assets for creditors to claim. See Chapter 7 Bankruptcy Basics at USCourts.gov.
- Chapter 11: Chapter 11 is for business owners who want to continue operating but need help in restructuring debt and/or achieving more favorable financial terms. Under Chapter 11, a petitioner will create a court-approved reorganization plan and continue to operate the business while debt is restructured. Chapter 11 typically offers the most options and flexibility for business owners. A bankruptcy petition can be filed voluntarily by the debtor, or it may be an involuntary petition, filed by creditors. See Chapter 11 Bankruptcy Basics.
- Chapter 12: Chapter 12 bankruptcy is designed for family farmers or family fishermen with “regular annual income.” Chapter 12 allows financially distressed family farmers and fishermen to propose and carry out a plan to repay all or part of their debts and continue to run their businesses while pursuing bankruptcy. See Chapter 12 Bankruptcy Basics.
- Chapter 13: In some circumstances, people who are self-employed, sole proprietors, or operating an unincorporated business can be eligible for Chapter 13 relief. Qualifying amounts are adjusted periodically based on the Consumer Price Index. A corporation or partnership cannot be a Chapter 13 debtor. See Chapter 13 Bankruptcy Basics.
- File the Bankruptcy Petition: Once the appropriate chapter is identified, the next step is to file the bankruptcy petition with the Bankruptcy Court and pay necessary filing fees. Filing involves submitting detailed financial information, schedules, and statements and collecting paperwork that includes loan documents, bank statements, business operations data, and other pertinent materials. If you file a reorganization-type bankruptcy, you will need to work with your attorney and the court to create a business reorganization plan that details how you will pay back certain debts before others can be discharged. Your bankruptcy lawyer will help ensure that all necessary documents are accurately prepared and filed within the specified deadlines to avoid potential complications.
- Notify Creditors: Upon filing the bankruptcy petition, an automatic stay goes into effect which halts most collection actions by creditors and provides the business with a temporary reprieve. Your bankruptcy lawyer must make sure all relevant creditors are notified of the bankruptcy filing and comply with legal requirements.
- Attend Creditors’ Meeting and Trustee Appointment: After filing, a meeting of creditors (341 meeting) is scheduled. Your bankruptcy lawyer can represent your business during this meeting in order to facilitate communication with creditors and address any concerns. A bankruptcy trustee will be appointed to oversee the case.
- Negotiate with Creditors: If you are filing under Chapter 11 or Chapter 13, your lawyer will negotiate with creditors as to terms they will accept and establish a repayment plan that is fair and workable for both parties.
- Confirmation of the Plan and Discharge: Once a repayment plan is developed and approved, it will be confirmed by the bankruptcy court. It is then up to you to follow through with its terms to completion. If you do so successfully, you should receive a discharge that eliminates the business’s remaining eligible debts. Your business should be in much better shape than before the bankruptcy.
Get Help from a Missouri Business Lawyer
Perhaps the most important step in pursuing a business bankruptcy is choosing the right bankruptcy law firm. Attorney Kelvin Birk is a lawyer as well as a Certified Public Accountant, with more than 30 years of experience in accounting and tax and business consulting and more than 20 years of experience in law. This combined expertise allows him to provide a level of service above that of other firms.
Kelvin Birk is highly respected in the Cape Girardeau community; he serves clients in and out of the state, and he will guide you through the process of declaring business bankruptcy. Whether significant debt is forcing you to close your business or you are simply wanting to restructure debt with more favorable terms, Birk Law Firm can help you achieve your business goals. You don’t have to go through this alone – rest assured that we will walk beside you every step of the way as you pursue a business bankruptcy.
Call us at 573-332-8585 today for a free consultation to start working toward a brighter financial future.
Attorney Kelvin Birk
Kelvin Birk is a lawyer as well as a certified public accountant, with more than 30 years of experience in accounting and tax and business consulting, and more than 20 years of experience in numerous legal matters. This combined expertise allows our law firm to provide a level of service above that of other firms. Whatever your legal situation, your attorney at Birk Law Firm can counsel you as to the tax implications. We have experience in providing myriad legal representation services to residents of southeast Missouri and other areas.. [ Attorney Bio ]
