The pandemic and its continuing consequences wreaked havoc on many Garden State businesses. The lockdowns forced many to shut their doors, and those businesses deemed essential had to cope with higher prices and unreliable suppliers. Inflationary concerns also make business difficult in the post-COVID recovery.
It is no wonder business bankruptcy due to COVID in New Jersey is on the rise. Depending on your specific circumstances, bankruptcy could be a way to liquidate the business and start fresh, or restructure your business debt and allow you to catch up.
Whatever your goals are, the advice of a capable business bankruptcy attorney is essential. Our experienced team at Gillman, Bruton & Capone have deep knowledge of bankruptcy laws and can discuss your situation, help you choose the best option to meet your goals, and stand by you until the bankruptcy process is complete.
Several different kinds of bankruptcy provide various forms of relief to different business structures. A New Jersey COVID business bankruptcy attorney can advise a business owner on which form of bankruptcy could be most appropriate in their specific case.
Chapter 7 is a liquidation bankruptcy available to individuals and sole proprietors. The bankruptcy court appoints a trustee who usually closes a business and liquidates its assets to satisfy creditors. In most cases, any debt remaining after the business is closed and its assets sold is forgiven. Some sole proprietors may use Chapter 7 bankruptcy to eliminate their debt and, if they run a low-overhead service business, potentially keep it operating.
Chapter 11 bankruptcy is a restructuring program that allows a business owner to pay off a portion of their debt in regular installments over three to five years while they reposition their business to be more profitable post-COVID. Corporations, small businesses, and sole proprietors might use Chapter 11 bankruptcy.
Congress passed a law that took effect in 2020, the Small Business Reorganization Act (SBRA), also known as Subchapter V. The SBRA makes the Chapter 11 process more accessible to many small businesses. The law provides a less expensive and more streamlined process by:
A business owner affected by the pandemic could continue to operate the business if their disposable income is directed toward paying down the business’s debt.
In June 2022, Congress raised the debt limits for people seeking to discharge debt under Chapter 13 bankruptcy. An individual or sole proprietor could file for Chapter 13 bankruptcy if their total secured and unsecured debt does not exceed $2,750,000.
If the person or sole proprietor has a regular income, they can agree to pay a portion of it to a bankruptcy trustee every month. The trustee consolidates the individual’s debts and pays creditors a percentage of the filer’s monthly payment. Any remaining debt is discharged once the filer has made all payments as agreed.
One of the most important factors for a business owner to evaluate when considering bankruptcy is whether their personal assets will be at risk and, if so, to what extent.
The state of New Jersey and the federal government both allow certain exemptions for bankruptcy filers. New Jersey allows you to choose the New Jersey exemptions or the federal exemptions when you file. This is to your benefit, since you can choose which assets you are most eager to protect and can select your exemption accordingly.
Many businesses received significant federal benefits related to COVID-19, and those benefits might not count toward the business’s assets in some cases. A New Jersey attorney can explain how COVID incentive payments might affect your bankruptcy.
The COVID pandemic was a disaster for many businesses like yours. When business debts are overwhelming, bankruptcy can be a workable solution. It relieves the business owner from the pressure of creditors’ collection efforts and might allow you to protect the most important assets.
If you are considering a business bankruptcy due to COVID in New Jersey, contact Gillman, Bruton & Capone for help. We understand that this situation happened due to worldwide factors that do not reflect on your choices or business strategy. We are here to get your business to a better place.