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Small Business Bankruptcy Attorneys in Tucson, Arizona

Before the Small Business Reorganization Act went into effect in February 2020, many financially distressed small businesses consulted a Tucson small  business bankruptcy attorney only to learn that —  ironically — they were too poor to reorganize under Chapter 11 because of the high costs associated with the process.

Since, small businesses and lenders should be prepared to protect their interests under the new Small Business Reorganization Act, which ultimately lowers the costs and simplifies the plan confirmation process to provide another option for small businesses wishing to reorganize.

Also called Subchapter V, referring to new Subchapter V of Chapter 11 of the Bankruptcy Code, the act aims to make small business bankruptcies faster and less expensive, which our Tucson bankruptcy attorney believes it is long overdue.

If you are an Arizona small business owner, here is what you should know about the new Act and how it affects your company’s bankruptcy options.

What Does the Small Business Reorganization Act Accomplish?

Before the Small Business Reorganization Act, or SBRA, was passed by Congress, small business bankruptcy attorneys and financial professionals alike condemned the existing system for its complex requirements and inflated costs that kept small business owners from successfully reorganizing their companies.

Prior to its enaction, struggling businesses could file for bankruptcy in two ways.

Chapters 7 bankruptcy, which included:  

  • Creating a bankruptcy estate comprised of the debtor’s non-exempt property
  • Appointing a trustee to liquidate the assets of the bankruptcy estate and distribute the proceeds to the debtor’s creditors

Chapter 7 is not an option for businesses hoping to survive bankruptcy or retain control of its operations.

Chapter 11 bankruptcy, which included:

  • Debtor restructures its debts through a court-approved plan while retaining control over its operations
  • Debtor is required to obtain the court’s approval of all non-ordinary course-of-business transactions
  • Debtor must comply with the U.S. trustee’s monthly reporting requirements throughout the bankruptcy plan
  • Debtor repays its debts meeting stringent requirements, which are confirmed by the bankruptcy court before the debtor can exit bankruptcy

Although the debtor retains control of the business operations during Chapter 11, the business is subject to increased oversight from the bankruptcy court and the U.S. trustee and may not be able to afford the costs associated with the reorganization.

The SBRA strives to strike a balance between Chapter 7 and Chapter 11 bankruptcies for small-business debtors.

The SBRA:

  • Lowers costs
  • Streamlines the plan confirmation process
  • Better enables small businesses to survive bankruptcy
  • Allows owners to retain control of its operations

Before, when the court appointed a committee, the small business was left to pay the expenses associated with retaining their professional services, which was often an overwhelming expenditure for the small business to endure.

With the new Act in place, a trustee will be appointed to each small-business debtor case to perform duties similar to those performed by a Chapter 13 trustee and help ensure protections that keep the reorganization on track.

What If The COVID-19 Pandemic Has Forced My Arizona Company Into Bankruptcy?

We recently discussed the COVID-19 pandemic and its effect on our community’s finances.

Our residents’ finances have been rattled in many ways, including layoffs, pay cuts, and unemployment dependency that is less than the salaries they once counted on.

If you are a small business owner, there is little doubt that the financial consequences of COVID-19 have hit your company especially hard.

Even small businesses that were fundamentally sound before the COVID-19 pandemic forced non-essential companies to close throughout the state may need to explore the full array of financial options available, including Sub chapter V.

While Chapter 11 bankruptcy will still require a well-planned strategy, the SBRA may provide accessible options that allow small businesses to negotiate with vendors, landlords, lenders, and other creditors by responsibly pausing their obligations during the pandemic with the possibility to resume normal operations once the health crisis subsides.

Until then, we are scheduling consultations remotely via phone, email, and video conferences to ensure all small business owners have access to the bankruptcy protection they deserve.

If You Have Questions About Small Business Bankruptcy Options in Arizona, Contact Eric Ollason Today for a Free Consultation

If you are a small business owner and are unsure of your bankruptcy options, the newly amended benefits of Chapter 11 reorganization may remedy many of the previous obstacles your company faced.

Contact our Tucson small business bankruptcy lawyer, Eric Ollason, today at (520) 791-2707 to schedule a free consultation to discuss your company’s unique financial position, so you can focus on pursuing a confident approach to getting back on track.

If you are in crisis, you need help. You need compassion and education on the following:

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