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Has your business been negatively impacted due to the Covid-19 lockdowns statewide and nationwide?
If so, you’re not alone.
While a handful of businesses are thriving– the vast majority of the world has been negatively impacted by the Covid-19 pandemic and resulting economic shutdowns.
The following industries have been hit pretty hard (not an all-inclusive list): food/restaurants, travel/airlines, fitness/gyms, anything entertainment related.
Covid-19 and the resulting government imposed shutdowns have evaporated many businesses. Those that do not have the financial means to sustain themselves may face bankruptcy. However, filing for bankruptcy is not on the priority list when times are tough. Despite what it may mean to file “BK,” it doesn’t always have to be a dead end or a sign to give up. There can be a light at the end of the tunnel when the right approach is taken to liquidate one’s business.
1)Changes to Bankruptcy Laws
First of all, business owners need to know that since the pandemic started, there have been major changes to bankruptcy rules under the CARES Act. Unemployment Benefits received due to the pandemic are not treated as income under the Means Test, which is a formula that is used in bankruptcy law to determine whether the debtor is eligible to file for Chapter 7 bankruptcy. If the debtor fails this test, he or she would only be able to file for Chapter 13 bankruptcy instead.
2) In-Person Court Appearances No Longer Necessary (depends on your location)
Given the technology at our fingertips, a lot of these changes should probably have been implemented years ago. Court appearances regarding filing that would usually need to be done in person can now be done online and via phone thanks to social distancing guidelines. The original signature requirement has been waived, which allows for signage of documents to be accepted via secured digital signatures.
3) In-Person Meetings with Creditors Done Virtually
In addition, any meetings with creditors that would historically require in-person interactions can now be conducted via telephone and/or a Zoom Conference call. Covid-19 has changed the ordinary situation so much that despite courts being closed, attorneys can still file online, with even some courts creating e-filing portals for self-represented clients.
4) I Can’t Afford to File for Bankruptcy!
Filing for bankruptcy costs money that some business owners may feel they can’t afford. However, there are ways to do so that is not only affordable but may even improve your credit score! Services like Upsolve makes it possible by being the largest non-profit in America that helps low-income and working-class families file for bankruptcy for free.
5) Re-building Credit can be Quicker Than You Think!
As for building back credit scores, that’s not to say that it won’t require attentive work– it definitely will; after taking careful measures to rebuild credit scores one can see positive results in as little as a year.
6) Address The Root Cause of Bankruptcy
Businesses will have to make sure that they are addressing the root cause of their bankruptcy. Strategies include making a budget, setting up emergency funds, monitoring their credit reports to make sure that it matches up with their bankruptcy filings, establishing new credit lines, making timely payments, and by practicing patience because getting out of bankruptcy, as also getting into it, doesn’t just happen overnight.
7) No Business is Safe
It is also good to realize that there are several types of bankruptcy and that even if a business is considered to be a “large company” it can still go bankrupt. Even a company like 24 Hour Fitness is now on a journey to zero hour fitness. There are 3 main types of bankruptcy to consider. Referred by chapters, Chapter 11 Bankruptcy is the best one to file for people who own a business because it allows the business owners to stay in control during the bankruptcy proceedings. Chapter 7 Bankruptcy is a “liquidation” bankruptcy for those who have sufficient income where some portion of possessions are sold and the money gained from selling these possessions are given to the creditors. The latter type (Chapter 7) is the most common form of bankruptcy where the business and legal counsel come up with a debt repayment plan.
8) Filing Earlier than Later can Expedite the Process
With all that is happening (and has happened) in 2020, we expect that there will be a surge in the number of bankruptcy filings in 2021. From our many years in business (CN Law), we see bankruptcy filings follow closely with the tax schedule. In other words, people start thinking about bankruptcy when they start filing their taxes– and often they use the money from their tax refunds to then fund their bankruptcy filing. To avoid the rush, we recommend starting the process sooner than later.
If any of this hits close to home, just remember we are here to help.
CN Law is just a phone call (866-651-6118) OR Contact Form away. You can also chat with us now (bottom right hand corner of screen). We offer all new potential clients a FREE consultation to discuss your situation. Any questions? Feel free to get in touch!
References:
Chris T. Nguyen is a native Californian; born and
raised in Southern California. Chris attended the
University of Southern California...Read More