We have to admit, some commemorative calendar days seem a bit … artificial. Who can take Talk Like William Shakespeare Day seriously? But Mom and Pop Business Owners Day, March 29, is recognized by the United States Census Bureau. It is a day to show a nation's gratitude to its many small businesses. Small businesses comprise 99.9 percent of all U.S. firms, says the Small Business Administration. Many Moms and Pops personally guarantee loans for their businesses. Bankruptcy can be a safe harbor.
Personal bankruptcy and business bankruptcy are two different legal tools, but they rely on the same body of protection. United States Bankruptcy Code includes six methods:
- Chapter 7, Liquidation Under the Bankruptcy Code
- Chapter 9, Municipality Bankruptcy
- Chapter 11, Reorganization Under the Bankruptcy Code
- Chapter 12, Family Farmer Bankruptcy or Family Fisherman Bankruptcy
- Chapter 13, Individual Debt Adjustment
- Chapter 15, Ancillary and Other Cross-Border Cases
Most Texans cannot avail themselves of Chapters 9 and 15; Chapter 12 has a small target group, too (though you could be among Texas's 408,506 farmers). That leaves Chapters 7, 11, and 13, the three most commonly pursued bankruptcies, all available to individuals and businesses.
Major publicly owned businesses often declare bankruptcy under Chapter 11. Their battalions of lawyers choose Chapter 11 to allow businesses the financial “breathing room” to remain in business while reorganizing. Any business and any individual can file for Chapter 11 bankruptcy. But it is expensive and may not be the best options for an individual.
Chapter 7 or Chapter 13
For most Mom and Pop small businesses, business finances are straightforward enough that personal bankruptcy proceedings — Chapter 7 or Chapter 13 bankruptcy — offer the best relief for the owners of those businesses. Why? Many Moms and Pops take out personal loans, not business loans, in the face of economic downturns.
Consider the recent pandemic problems. A lot of small businesses backed up their company finances with personal guarantees from their owners. Instead of borrowing against business holdings (office equipment, inventory, raw materials, and the like), Mom and Pop turned to the collateral wrapped up in their own resources:
- Primary homes
- Vacation homes
- Recreational vehicles
Mom and Pop may have extended credit to regular customers, limiting cash flow. They may have advanced money to employees and then been unable to tap the Paycheck Protection Program (PPP, which ended May 31, 2021).
Mom and Pop may have used their personal credit cards to pay for business operations.
Any number of reasons could mean Mom and Pop Incorporated now faces financial peril. Bankruptcy is a reasonable avenue to get out from under the bills and badgering.
Hounded By Creditors?
The best intentions mean nothing to creditors. You could be disrupted all day long by threatening telephone calls from bill collectors.
An immediate effect of working with an experienced bankruptcy attorney to file for Chapter 7, 11, or 13 bankruptcy is a court-ordered end to creditor harassment. One day you were just Mom and Pop, but with the filing you are Mom and Pop and the United States Bankruptcy Court system. Creditors are happy to make your life miserable, but creditors do not tangle with the courts!
With the filing of bankruptcy, you can get a reprieve from creditors and get the fresh start you need to:
- Develop a repayment plan
- Craft a realistic budget
- Preserve relationships with vendors
- Keep customers
You can protect your personal assets through bankruptcy, safeguarding your primary residence from falling under the auctioneer's gavel even if your business is bogged down by burdensome debt.
Bankruptcy attorneys do not wander up and down Main Street soliciting business. You need to call a compassionate, careful, diligent bankruptcy attorney today. That fresh start you and your business need could be yours before you know it.
You can get in touch with The Page Law Firm any weekday. You don't have to wait until Talk Like William Shakespeare Day (it really is a thing); you can call right now, at 214-618-2101, or contact our offices online. We can help your small business keep its doors open through the judicious use of bankruptcy protection. Don't let another commemorative calendar day slip by; learn more today!
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