THE UNIQUE CHALLENGES OF SMALL BUSINESS BANKRUPTCY

Jan 11, 2024

Bankruptcy can often help a small business

If you own a small business, you know that there are many considerations and challenges to keeping your business afloat and your revenue flowing into your company. In addition to the necessity to keep the revenue flowing, the small business owner must do their best to keep both their fixed and variable costs low. Bankruptcy is one invaluable tool for the small business owner to help lower high costs by either letting vendors and creditor card companies end their contracts without any threat of legal damages, or, at the very least a specific formula to determine with certainty what those costs will be. At the same time the small business owner may also re-negotiate with existing creditors to help lower their overhead costs.

 

A Bankruptcy Court sitting in a Chapter 11 case has very broad powers to allow a Chapter 11 business debtor to re-negotiate with utility companies, supply contractors and unions or other labor representatives as well many, many other individuals or entities. Chapter 11 business cases are for the business owner who wants to keep their business going and has a realistic chance to do so if certain costs are renegotiated and other legal objections are met. It is important to note, however, that Chapter 11 cases are complicated, expensive,  and require a heightened level of attention. It is critical that before filing for relief under Chapter 11 of the Bankruptcy Code you have a detailed discussion with your experienced bankruptcy attorney regarding your current state of affairs as well as your realistic goals for your small business in the near, intermediate, and long-term future. These discussions will inform your attorney as to whether it is better to negotiate a pre-packaged Chapter 11 case with your creditors and then file or whether it is better to file for relief under Chapter 11 and file for various protective Orders on the first day at the inception of your case.

 

CHAPTER 13

 

           Yes, Chapter 13 has an important place in small business bankruptcy discussions. If you run your own business, you are almost certain to have personal liability on business debt. There are often numerous guarantees and business credit cards that you signed incurring liability in your personal capacity as well as your capacity as the owner of your small business, perhaps even using personal property or your home as collateral. Chapter 13 can allow you to keep your business and collateral as you pay an affordable plan payment to creditors. To be sure, your business cannot file for bankruptcy under Chapter 13 of the Bankruptcy Code. If you file for relief under Chapter 13 of the Bankruptcy Code you must be an individual.

 

CHAPTER 13

 

           Chapter seven of the Bankruptcy Code allows for a business to file for relief under Chapter 7 to liquidate the business. Once again, the small business owner likely has personal liability on business debts. In many cases, the business owner can file a Chapter 7 personal bankruptcy to eliminate his personal liability and keep his business. Why? because in Colorado you have a $60,000 tools of trade exemption which allows you to keep your business truck and tools so you can continue you livelihood. In most small businesses the value lies in your education and experience. Plumbers, welders, electricians, and all manner of skilled craftsmen as well as lawyers, accountants and architects certainly fall within the ambit of this discussion. You can always reopen a new business doing the same thing whenever you need to as there is no prohibition against doing so.

 

           The law firm of Long & Long, P.C. have decades of combined experience in bankruptcy helping individuals in Denver, Centennial, Castle Rock, and the metro area. Long & Long, P.C has the know how to represent any type of client, whether debtor or creditor, in any type of bankruptcy proceeding, including Chapter 13,  and Chapter 7. Long & Long, P.C. can be reached at (303) 832-2655.                                                                                                                                           

       

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How Does a Joint Petition Work?

09 Nov, 2023
A joint petition is when a married couple together files a single bankruptcy case. Unless noted otherwise in the statutes, if a married couple files jointly in Colorado, each spouse may claim the full amount of each exemption. The favorable effect of this is that the couple can claim twice the amount of exemptions. Unmarried couples, partnerships, and corporations must file separate petitions. If you are an individual and have a business entity, such as an LLC or a partnership, you cannot file a single petition for yourself and that business. In such a case you will note your interest in your company in your individual filing, e.g., John Doe, a member of Doe, LLC. If you are a sole proprietor, however, you may include your 100% ownership of the business in your individual bankruptcy. Once a joint petition is filed, all property and debts between the two individuals in the marriage become part of the bankruptcy filing. Sometimes it may be advisable for one spouse to file a petition alone and without the other spouse. An example is when the debts are owed only by the filing spouse, and not the non-filing spouse. Though the non-filing spouse is not part of the bankruptcy, information regarding the income of the non-filing spouse must be included in the filing spouse’s statements and schedules. Why, you ask? Because the income from the non-filing spouse given for the benefit of the filing spouse may mean the filing spouse has the means to pay some of the debt. The Bankruptcy Process You can start the bankruptcy process by filing a petition with the bankruptcy court serving your area. In addition to the petition, you must also file with the court (1) schedules of assets and liabilities; (2) a schedule of current income and expenditures; (3) a statement of financial affairs; and (4) a schedule of executory contracts and unexpired leases. In addition, you must provide the assigned trustee with a copy of the tax return or returns for the most recent year as well as tax returns filed during the case. These documents must be provided for both husband and wife. Creditors Meeting Between 21 and 40 days after the filing date, the trustee will call a meeting of your creditors. In the case of a joint petition, both husband and wife must attend the creditors’ meeting and answer questions regarding their financial status and property. Within ten days of this meeting, the trustee will communicate to the court whether the case should be presumed to be an abuse under the "means test". Benefits Of Joint Bankruptcy Filing There are benefits to filing jointly. You will save on filing fees, as the fee is the same for both as it is for one. Filing jointly will often give the couple a greater chance of keeping their property because of the “doubling” of exemption amounts; However, in Colorado the homestead exemption amount is not doubled with a total maximum at the time of writing of $75,000, or $105,000 if 60 or over or disabled. In addition, joint filing will save the married couple a lot of time. Determining whether to file together or separately, whether to file for chapter 7 or chapter 13 bankruptcy, and ensuring the protection of as much of your property as possible is a complex process. Each couple’s situation is different, so it is important that a married couple considering a joint or individual petition consult an experienced Bankruptcy Attorney. As a former trustee for the U.S. Bankruptcy Court, with over thirty years experience, Attorney Martin Long is an expert in the industry with decades of experience in Colorado . We also serve Aurora, Centennial, Highlands Ranch, Denver, Lakewood, Englewood, Littleton, Castle Rock, Colorado and the Denver metro area with three convenient locations. For help with your financial matter, call the Law Office of Long & Long for a free initial consultation at 303-832-2655 .

Can I Change From One Bankruptcy Chapter to Another?

09 Nov, 2023
As a Bankruptcy Attorney , I occasionally have clients ask, “Can I change from one chapter to another under the bankruptcy code? And if so, which chapter should I file under?” The short answer is: Yes. You may convert from a Chapter 7 to a Chapter 13, and vice-versa, with certain restrictions and limitations. A Recap of Chapter 7 and Chapter 13 Bankruptcies Chapter 7 bankruptcy provides for complete liquidation of the debtor’s non-exempt assets. This involves the bankruptcy trustee selling all of the debtor’s assets, subject to certain statutory exemptions, and paying the creditors with the liquidation proceeds. However, Chapter 7 cases often result in the debtor keeping all of their assets, in part because they were done correctly by an experienced bankruptcy attorney. If an individual’s current monthly income is more than the state median then the bankruptcy code requires the debtor to meet a “means test” to ensure the Chapter 7 filing is not presumptively abusive. Unless the individual overcomes this presumption, the case will typically be converted to a Chapter 13 bankruptcy or dismissed. Chapter 13 (“wage earner's plan”) is another part of the bankruptcy code that allows individuals to halt collection actions and present a repayment plan to debtors that takes place over three to five years. If a debtor’s current monthly income is less than the state median then the plan will generally be for three years, and if the individual’s current monthly income is greater than the state median, then the repayment plan will be five years. Converting From One Chapter to Another As mentioned, a Chapter 7 filing may be converted to a Chapter 13 bankruptcy proceeding. A debtor may convert a Chapter 7 to a Chapter 13. This may be done for a variety of reasons. For example, a debtor may file under Chapter 7 and realize that Chapter 13 may be a better alternative -- especially if the debtor wishes to keep certain property, does not satisfy the means test, or wishes to consolidate their debts and enter a repayment plan. This will stop collection efforts and allow the debtor to emerge from the bankruptcy plan with a “clean slate.” However, an individual cannot file under chapter 7 or any other chapter if during the preceding 180 days a prior bankruptcy petition was dismissed due to lack of the debtor’s cooperation (including appearances), or the debtor voluntarily dismissed the previous case after lien creditors sought relief from the bankruptcy court to recover property. There are certain eligibility requirements that will not allow conversion to a chapter if that case had previously been converted. Contact a Colorado Bankruptcy Attorney As a former trustee for the U.S. Bankruptcy Court, with over thirty years’ experience, Bankrupcy Attorney Martin Long is an expert in the industry with decades of experience in Bankruptcy Law in Centennial Colorado. We also serve Aurora, Loveland, Highlands Ranch, Denver, Littleton, Castle Rock, Colorado and the Denver metro area and front range with two convenient locations. For help with your financial matter, contact the Law Office of Long & Long P.C. for a free initial consultation at 303-832-2655.
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