No company wants to consider bankruptcy, especially during a situation as tumultuous as the coronavirus outbreak. Unfortunately, bankruptcy is a reality for many businesses. Debts can quickly get out of hand when the economy contracts, especially when it does so broadly and unexpectedly. However, the unique legislative and economic environment surrounding the COVID-19 pandemic is providing small businesses with options designed to help them survive this challenging situation. Work with a commercial bankruptcy attorney like the team at Ritter Spencer Cheng PLLC to learn more about how filing for bankruptcy may help small businesses survive an economic downturn.
New Legislation for Small Businesses
With companies continually told to close their doors due to the coronavirus and more shelter-in-place orders being released every day, the federal government has established some protections for individuals and small businesses with the Coronavirus Aid, Relief, and Economic Security, or CARES, Act. Included in the CARES Act are funds for individuals to promote consumer spending and economic growth, as well as funds set aside to help small businesses survive. The Paycheck Protection Program, passed as an element of the CARES Act, may be especially helpful for companies struggling to stay afloat and cover payroll for their employees. This program allows businesses to apply for a loan that must be used to maintain employees and cover payroll expenses. If used for these purposes, the loan will be forgiven in full for most businesses. Additionally, the CARES Act expands the definition of what is considered a small business throughout this unprecedented time so that any affected business with 500 employees or less can benefit.
A Fresh Start
It is understandable that for some businesses, these measures from the federal government may not be enough to cover the mounting debts they may be facing during this unprecedented global crisis. In addition to the programs mentioned above, the CARES Act also expanded the definition of a small business debtor under Subchapter V of Chapter 11 of the Bankruptcy Code. For the next year, the government will consider a business or business owner with less than $7.5 million in debts to be a small business debtor. Therefore, more business owners will be able to file for Chapter 11 bankruptcy and receive benefits under Subchapter V due to the expansion of the definition of small business. Although no business wants to file for bankruptcy, Subchapter V of Chapter 11 helps companies reorganize more affordably without requiring several costly procedures. Going through a bankruptcy filing can be difficult, but this is an important way a business can obtain a fresh start and begin working towards a successful future.
Preparing for the Unknown
No one can be sure when exactly this crisis will be over or when the global economy will recover. This uncertainty makes it difficult for businesses to prepare for what could be an economic contraction that lasts only a few weeks or what could be a more prolonged recession. As much as a business may think they are prepared for any scenario, it may be beneficial for your company to consult with a commercial business attorney to develop a plan in the event your business’s financial situation changes over the coming weeks. It is ideal for bankruptcy attorneys to have as much time as possible to recommend a reorganization strategy that is tailored to your business. The earlier a struggling business speaks with a commercial bankruptcy attorney, the more likely they are to restructure and reorganize effectively.
The Dallas law firm of Ritter Spencer Cheng PLLC understands how difficult this time is for individuals, families, and small businesses, and we are here to support you. Our team of experienced commercial bankruptcy attorneys can advise business owners on recommended next steps and develop a tailored restructuring and reorganization plan designed to help your business succeed. If your business is struggling with the economic fallout from the coronavirus pandemic or if you are interested in planning for your company’s financial future, contact Ritter Spencer Cheng PLLC to learn more about the options available to your business.
