Small Business Bankruptcies

Bankruptcy Protection for Businesses in New Jersey

Bankruptcy PetitionApproximately 40% of all new business are not operational on or by their four year anniversary from the commencement of operation.  According to the SBA, in 2008 New Jersey had over 750,000 small businesses in operation.  A small business is described as a business that has less than 500 employees.  The United States Bankruptcy Code provides protection to business entities as well as individuals who are unable to meet their daily expenses.

Businesses may File for Bankruptcy Under Chapter 7 or Chapter 11

A business bankruptcy proceeding can be performed through liquidation under Chapter 7 or a reorganization under Chapter 11.  A business would typically file for Chapter 7 bankruptcy (liquidation) in the event that there is no prospect whatsoever of the business succeeding sometime in the future.  When a business’s obligations owed are insurmountable and any revenues that the business could potentially generate would not be able to meet its operation expenses, a Chapter 7 bankruptcy filing may be the answer.

If in fact the business does have potential or is suffering from growing pains, a Chapter 11 or Chapter 13 bankruptcy filing may be the appropriate option.  Under these chapters of the Bankruptcy Code, the business would reorganize itself and be provided with additional time to pay off various creditors.  This reorganization takes places under the supervision of the assigned bankruptcy trustee and the business’s creditors are required to approve the plan that is contemplated.  In the event that the creditors and the court find the plan to be acceptable, the creditors are paid a portion of what is owed to them over a period of time.

Often times there is a relation between the owner’s business liabilities and his or her personal liabilities.   Due to this, a Chapter 13 bankruptcy is pursued as it may protect the debtor’s home and other personal assets from being liquidated.

Become Profitable Again After Bankruptcy

In the right circumstances, a bankruptcy filing can be an effective way for the business to maintain its viability and eventually succeed.  A bankruptcy filing allows a business entity to cut costs and reduce overhead until such time as the business can become profitable again. Delta Airlines, General Motors, United Airlines, Dow Corning, Texaco and a host of other major corporations have filed for Chapter 11 reorganization and have subsequently completed the Chapter 11 plan and have regained profitability.

Small businesses file for bankruptcy for a number of reasons, such as:

  • Natural disasters.  Hurricane Sandy has had a major impact on a number of small businesses in the Jersey Shore area.  An unfortunate consequence of a natural disaster such as Hurricane Sandy is the impact on small regional businesses.
  • Personal illness.  Often times, one or two people are critical to the continued growth and sustainability to the small business.  If one of those business owners were to be diagnosed with a dreadful disease, such as cancer or any other debilitating illness, it could have a devastating impact on the viability of a small business entity.
  • Operational mistakes.  Typically, new business owners make mistakes as it relates to tax filings and other management issues.  These mistakes may be corrected over time and a bankruptcy filing may afford the business the time it needs to get in order and rectify any mistakes that were made during the infancy of the business.

Get Your Business Bankruptcy Questions Answered!

In the event that you are a small business owner in Ocean County or Monmouth County, New Jersey and your business is suffering, you should contact an experienced bankruptcy attorney.  Review your options as soon as you realize your business may be in financial trouble.  The bankruptcy attorneys at Villani & DeLuca offer a free initial consultation and maybe able to provide you with some direction as to the preferred course of action for your business prospectively.  All consultations are completely confidential.

Please call (732) 965-3390 today to get the answers to your questions.  Save your business before it’s too late!