OK, so the picture is Eva Longoria in her bankrupt Las Vegas restaurant.
But Michigan businesses can benefit from bankruptcy filing too
Chapter 11 or Chapter 13 bankruptcy can enable a business to restructure and/or discharge debt, and continue operating.
What chapter of bankruptcy a business can file depends on the way the business is organized.
LLCs, or any other type of corporation, cannot file chapter 13, which is for individuals only.
So, a business which is a sole proprietorship can file a Chapter 13, as long as it is under the debt limit.
If you owe more than $360,475 unsecured debt, or more than $1,081,400 of secured debt, you cannot file Chapter 13.
But, you are still eligible for Chapter 11.
In Chapter 11, you are your own trustee.
You have a fiduciary duty to operate in the best interest of your creditors.
The United States Trustee oversees all Chapter 11s, requiring monthly financial reports to be filed, taxes and insurance to be kept current.
The idea is, theimposed by the bankruptcy filing is keeping all your creditors at bay, so you better not be going further in the hole, and not be risking the creditor’s collateral by having it uninsured.
Also in Chapter 11, you have 120 days to file a plan, versus 14 days in a Chapter 13 case.
The Court can extend these deadlines, for cause.
Chapter 11 is much more expensive, the filing fee alone is $1,139 versus $274 for a Chapter 113.
I have done dozens of Chapter 11 cases, travel agencies, individuals, bars, auto repair shops, even a place that made cheesecake.
You must figure out if there is a level at which your business can operate profitably.
Why did you start losing money?
Unfortunately, the answer often is a partner who absconded with the funds.
If you run a bar that is across from a factory that closed, it ain’t likely that business is coming back.
But, if you are a travel agency that already cut staff and overhead, but cannot pay unsecured debt that accumulated, a Chapter 11 can get rid of that debt and keep you in business.
This is just an overview, as always, consult an expert about your specific situation.
Michigan Business Bankruptcy