Bankruptcy Options and Alternatives for Small Businesses in Florida
From high interest rates to the lingering effects of the COVID-19 pandemic, many small businesses in Florida find themselves struggling for a variety of reasons. If your small business is struggling, it may be worth considering bankruptcy and its alternatives. Small business owners have a variety of options available, and an experienced Miami bankruptcy litigation attorney can help you choose the option that makes the most sense based on your business’s financial circumstances.
Not only are there a variety of reasons why small business owners might need to consider bankruptcy and its alternatives, but the options that are available also offer a variety of potential benefits. Just like any other business matter, informed decision-making is key. If your Florida small business needs relief from financial strain, taking appropriate action could not only provide the relief your business needs, but it could serve a number of other beneficial purposes as well.
7 Bankruptcy Options and Alternatives for Small Businesses in Florida
What are your options if your small business is struggling? Here are seven bankruptcy options and alternatives for small businesses in Florida:
1. “Traditional” Chapter 11 Bankruptcy
One option is to file for a “traditional” Chapter 11 bankruptcy. Chapter 11 of the U.S. Bankruptcy Code allows businesses to reorganize their debts so that they can afford to make their payments as they come due. In many cases, going through a Chapter 11 bankruptcy will involve eliminating (or “discharging”) certain debts as well.
The purpose of a Chapter 11 bankruptcy is not to wind up a small business’s affairs. Rather, reorganizing a business’s debts under Chapter 11 allows the business to continue operating without going into default—and ultimately to regain its financial footing over time. To pursue a Chapter 11 bankruptcy, a small business must be capable of making payments under its reorganized payment plan—and this is one of the first considerations you will want to address with your Miami bankruptcy litigation attorney during your initial consultation.
2. Subchapter V Small Business Bankruptcy
Another option is to pursue a small business bankruptcy under Subchapter V. This option is specifically available to small businesses, and Congress enacted Subchapter V in order to make the reorganization process less costly—and thus more accessible to more struggling businesses.
A Subchapter V small business bankruptcy is effectively a streamlined version of a traditional Chapter 11 bankruptcy, and it is a viable solution for many small businesses that need help getting out from unmanageable debt so that they can continue working toward profitability. If your small business is struggling, this is definitely an option that you will want to discuss with your Miami bankruptcy litigation attorney.
3. “Small Business Case” Under BAPCPA
Another alternative to filing for a traditional reorganization bankruptcy under Chapter 11 is to file a “small business case” under the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA). Similar to Subchapter V, a “small business case” offers several benefits (including reduced costs) compared to a traditional Chapter 11 filing. The enactment of BAPCPA preceded the enactment of Subchapter V, and today, small businesses will realize the most benefits from filing under Subchapter V in most cases. With that said, filing a “small business case” under BAPCPA remains a viable option, and, as the owner of a struggling small business, it is important to consider all of the options you have on the table.
4. Chapter 7 Liquidation Bankruptcy
If your small business is struggling and you are ready to move on (or try again), then your best option may be to pursue a liquidation bankruptcy under Chapter 7. Unlike a reorganization bankruptcy under Chapter 11 (or Subchapter V), the primary focus of a liquidation bankruptcy is on winding up the business’s affairs. The business’s non-exempt assets will be used to pay down its outstanding debts; then, at the end of the process, its remaining liability will be discharged—unless any of its debts are nondischargeable or subject to other defenses to discharge.
5. Assignment for the Benefit of Creditors
An assignment for the benefit of creditors (ABC) is another alternative that can be used to wind up a struggling small business’s affairs. During an ABC, the business’s assets are transferred to an intermediary, and then the intermediary sells the business’s assets and uses the sale proceeds to pay the business’s creditors. In addition to typically being less costly than a Chapter 7 bankruptcy, an ABC can offer a variety of other benefits as well. However, like all of the options on this list, an ABC also has limitations that require careful consideration.
6. Informal Debt Restructuring
Rather than reorganizing your small business’s debts under Chapter 11 (or Subchapter V), it may be possible to restructure your business’s debts informally. Oftentimes, it will be in a debtor’s and its creditors’ best interests to avoid the costs and formalities of bankruptcy. Additionally, if your small business has one or a few debts that are particularly problematic, it may be possible to target these debts specifically without raising concerns with your business’s other creditors. This is an option that an experienced Miami bankruptcy litigation attorney will be able to help you consider as well.
7. Corporate and Commercial Alternatives
Finally, in many cases, small business owners can also pursue corporate and commercial alternatives to a Chapter 11 or Chapter 7 bankruptcy. From streamlining internal operations in order to reduce costs to renegotiating with vendors and customers, small businesses will often have a variety of options available. An experienced attorney will be able to help you consider these options as well—and will ultimately be able to help you choose the option that makes the most sense based on your goals and your small business’s needs.
Schedule a Free Consultation with a Miami Bankruptcy Litigation Attorney Today
If you are a small business owner in Florida and would like to know more about the options you have available, we invite you to get in touch. To schedule a free consultation with a Miami bankruptcy litigation attorney at Edelboim Lieberman, please call 305-768-9909 or request an appointment online today.
