How Can (and Should) Business Owners Streamline the Bankruptcy Process?

When seeking to reorganize your company’s debts so that it can continue operating, an informed approach is critical. Not only can mistakes and oversights lead to unnecessary challenges and delays, but in some cases, they can jeopardize the entire bankruptcy process. The more business owners can streamline the process, the fewer unnecessary risks they will face. So, what can (and should) you do to ensure that the process goes as smoothly as possible?

To facilitate a smooth business bankruptcy, business owners need to be proactive. By working with an experienced Miami bankruptcy litigation attorney to execute a focused strategy from the outset, business owners can often reduce their costs and risks significantly. While a proactive approach won’t prevent unexpected issues in all cases, it will generally afford the greatest opportunity for a streamlined resolution.

7 Steps Business Owners Can Take to Streamline the Bankruptcy Reorganization Process

With this in mind, here are seven steps business owners can take to streamline the bankruptcy reorganization process in Florida:

1. Make Sure a Business Bankruptcy is Your Company’s Best Option

Before you begin down the path of pursuing a business bankruptcy, you need to make sure this is your company’s best option. While the bankruptcy process affords several benefits—and it will be the best option in many cases—it also has some drawbacks. If it is possible to get your business back on solid financial footing without facing these drawbacks, then pursuing an alternative to bankruptcy may be a better solution.

With that said, if your business has fallen behind on its payment obligations or is on the brink of default, time may be of the essence. As a result, you will want to make this decision quickly. An experienced Miami bankruptcy litigation attorney can help you efficiently choose the best path forward for your business.

2. Pursue a “Small Business Case” Bankruptcy Under Chapter 11

Qualifying small businesses can use the “small business case” bankruptcy under Chapter 11 to streamline the bankruptcy process. To qualify for a “small business case” bankruptcy under Chapter 11, a company must have unsecured debts of $3,024,725 or less, with at least 50 percent of this debt resulting from its commercial or business activities.

As the U.S. Courts explain, “[b]ecause certain filing deadlines are different and extensions are more difficult to obtain, a small business case normally proceeds more quickly than other chapter 11 cases.” The costs involved in pursuing a “small business case” bankruptcy are generally lower as well. For most businesses that meet the debt threshold for a “small business case” filing, it will typically make sense to pursue either this option or a small business bankruptcy under Subchapter V.

3. Pursue a Small Business Bankruptcy Under Subchapter V

A small business bankruptcy under Subchapter V offers similar benefits to a “small business case” bankruptcy under Chapter 11. However, the debt threshold is higher ($7.5 million), and it offers additional benefits as well. As a result, Subchapter V filings are quickly becoming the go-to option for small business owners seeking to navigate the bankruptcy process as efficiently as possible.

In a Subchapter V bankruptcy, the debtor is subject to less oversight than a debtor in a “small business case” filing under Chapter 11. Additionally, in a Subchapter V case, only the debtor is permitted to file a reorganization plan. These two factors alone significantly streamline the process and make a Subchapter V filing an attractive option for many struggling small business owners.

4. Negotiate a “Prepackaged” (or “Prepack”) Bankruptcy with Your Business’ Creditors

Regardless of the type of bankruptcy a business owner chooses to pursue, negotiating a “prepackaged” or “prepack”) bankruptcy can help streamline the process as well. In a “prepack” bankruptcy case, the debtor and creditors go to court with an agreed reorganization plan in hand. In many cases, negotiating with a business’s creditors before initiating a bankruptcy proceeding will lead to a favorable non-bankruptcy resolution. But, when an informal restructuring or loan workout isn’t on the table, a “prepack” bankruptcy can be the next best option.

5. Make Sure You Know Which Debts Are (and Aren’t) Eligible for Discharge

Even in a reorganization bankruptcy under Chapter 11 or Subchapter V, the debtor will often be able to eliminate (or “discharge”) certain debts. Making sure you know which debts are (and aren’t) eligible for discharge will allow you to make informed and strategic decisions both before and during the bankruptcy process. If you seek discharge of an ineligible debt, this can lead to both unnecessary costs and unnecessary delays. Neither of these is conducive to an efficient filing, and neither is necessary with a proactive approach focused on ensuring a streamlined bankruptcy.

6. Make Sure You Can Meet All Applicable Filing Deadlines

No matter which type of business bankruptcy you choose to pursue, you will need to meet multiple deadlines throughout the process. Before you file, you will want to make sure you are prepared to meet these deadlines as they arise—and, if you are not ready, you will want to work with your Miami bankruptcy litigation attorney to take the additional steps that are necessary.

7. Avoid Miscues that Could Lead to Preference Claims or Other Defenses to Discharge

Finally, as you prepare to go through the business bankruptcy process, you will also want to make sure you avoid miscues that could lead to preference claims or other defenses to discharge. Adversary proceedings can increase the timeline (and cost) of a business bankruptcy significantly, and they can be avoided with an informed and proactive approach in most cases.

Schedule a Complimentary Consultation with a Miami Bankruptcy Litigation Attorney

If you own a business in Florida and need to know more about the steps involved in filing a streamlined business bankruptcy, we invite you to get in touch. To speak with an experienced Miami bankruptcy litigation attorney in confidence, please call 305-768-9909 or request a complimentary consultation online today.