The Coronavirus (COVID-19) has had a devastating impact on small and medium sized businesses in Louisiana. Businesses are faced with difficult decisions such as whether to temporarily lay off employees or decide which bills to pay with little or no revenue. Small and medium sized businesses are needing practical advice when faced with these difficult financial decisions.
Filing a Chapter 11 bankruptcy may be a means to maintain the viability of your business. Chapter 11 bankruptcy is very different from a Chapter 7 bankruptcy. A Chapter 7 bankruptcy is the most common bankruptcy involving a complete liquidation of assets. If a business files a Chapter 7 bankruptcy, it is required to close down its operations. In a Chapter 11 bankruptcy, the business is not required to close down but instead can remain operational in order to restructure and pay down its debts.
To discuss your options with a business bankruptcy attorney, please contact us in Metairie or Mandeville.
Continuing Business Operations
A Chapter 11 bankruptcy allows a business to continue to operate during the bankruptcy proceeding. The idea for allowing the business to maintain its operations is to generate revenue through its business operations to pay back its creditors. The business is more valuable to society, the economy and its employees as an ongoing concern.
Another benefit is an automatic stay which stops the business’s creditors’ collection actions such as a pending lawsuit, bank levies, wage garnishments or collection calls. The automatic stay allows the business time to set forth a plan to pay back its creditors without the constant pressure debt collection may bring.
Plan of Reorganization
The main purpose of a Chapter 11 bankruptcy is the plan of reorganization. This plan will set forth how the business’s creditors will be paid back. Generally, a plan of reorganization will provide a business with more time to pay back its creditors. Further, the plan is also an opportunity to adjust interest rates of high-interest loans secured by the business’s assets.
Discharge of Unsecured Debt
The final benefit of filing a Chapter 11 bankruptcy is that the business may not be required to pay the full amount of the unsecured debts. Specifically, unsecured debt may be discharged in the event that a business’s plan of reorganization gets approved with repayment of less than full of the unsecured debt.
Learn More About the Benefits of Chapter 11
The benefits of Chapter 11 can help you become debt free and start your financial life with a clean slate. If you have questions about Chapter 11 or how it can help you, contact Attorney Doug Sunseri at 985-218-0494 (Metairie) or Attorney Michelle Sunseri at 504-662-9596 (Mandeville) of Nicaud & Sunseri Law Firm, LLC.