Weintraub & Selth, A Professional Corporation
Call Today 310-584-7702

Los Angeles California Bankruptcy Blog

A closer look at liquidation for business owners

A common term associated with filing Chapter 7 bankruptcy is "liquidation." Many California business owners understand the term well. After all, businesses do not have to file bankruptcy to liquidate their assets. However, it can be difficult to know where to start when it comes to filing bankruptcy and proceeding with liquidation.

So, here is a closer look at what liquidation means for businesses.

Three things business owners should consider before bankruptcy

The decision to file bankruptcy is not always an easy one for California business owners. They worry about how bankruptcy might impact their business and their own current finances. 

While bankruptcy can have many benefits for small businesses, many variables can impact what chapter a business owner should choose. Here are a few questions that all business owners should consider before filing bankruptcy to relieve their debts.

Popular restaurant files Chapter 11 after rapid expansion

The business world is full of adages that encourage risk-taking (“nothing ventured, nothing gained”) and seizing opportunity (“strike while the iron is hot”). But this advice, while well-intentioned, needs to be tempered by appropriate caution. Even when a business is a booming success and continued growth seems inevitable, fortunes can change quickly.

Therefore, it is critical to balance current financial stability and investment in growth. The recent Chapter 11 filing of a popular Sushi restaurant is a good example of what can go wrong when ambition outpaces financial realities.

What Are The Top Causes of Business Debt?

Debt is nearly unavoidable these days. Students graduate from college with loans to pay back, and homeowners have mortgages hanging over their heads for years. Businesses are no exception to this trend. 

Many small businesses in California struggle with debt. In fact, debt is a natural part of a business venture. It may even be good for a business, but healthy debt can quickly add up to a bigger financial problem.

Watch out for wasted spending as a small business owner

There are all kinds of expenses that can come up in connection to running a business. Some of these costs are needed to put a company in a strong position to compete and succeed. However, some are unnecessary and end up bringing little benefit to a company.

Avoiding this second class of spending, waste, can be very important for small businesses. Waste can drain a company’s resources, cutting in on profits and impeding its ability to achieve its overall potential. It can also leave a company in a particularly vulnerable position should financial shocks hit.

Choosing between Chapter 11, Chapter 13 and Chapter 7 bankruptcy

Any business can encounter problems that seem insurmountable. When that happens, business owners have a serious decision to make: should we declare bankruptcy? Filing for bankruptcy helps individuals and businesses get a clean financial slate, but not every form of bankruptcy works for all businesses. For businesses, the right choice depends on how the company is organized – sole proprietorship, corporation, LLC, or otherwise.

Today, we cover the basics of Chapter 11, Chapter 13 and Chapter 7 bankruptcy, and how each might be better suited to one type of business over another.

How the Small Business Reorganization Act could change bankruptcy

This spring, Congress reintroduced a bill that would provide small businesses with greater opportunities to benefit from Chapter 11 bankruptcy. The Small Business Reorganization Act (SBRA), if passed, will add a Subchapter V to the United States Bankruptcy Code. New provisions propose giving businesses with less than $2,566,050 in liabilities a more streamlined method of debt relief.

Here are the highlights for small business owners present in the proposed law:

A Bankruptcy Filing May Ultimately Strengthen Your Business

 

One myth that our bankruptcy law firm consistently encounters concerns the public perception of a bankruptcy filing. Admittedly, bankruptcy laws are intended to provide protections to businesses facing certain debt management issues. Yet far too often, we hear from clients concerned that a Chapter 11 business reorganization plan will be a death sentence. To the contrary, there are many examples of businesses that have used a repayment plan to emerge stronger than ever.

Keep relationships strong during Chapter 11 reorganization

Too many people think of bankruptcy as the end of the road for a small business – but it doesn’t have to be. Filing for Chapter 11 reorganization bankruptcy allows you to restructure business debt, satisfy creditors and get your company back on track. If all goes well, the business survives and even comes out stronger than before.

As you can imagine, however, this is not an easy feat. Plenty of companies never make it out of restructuring. Therefore, it is important to learn from the success stories whenever we can. In a recent business insider column, a CEO named Greg Knight told the story of how his $2 billion company quickly fell into bankruptcy and some of the steps he took to bring the company out on the other side.

Big-name retailers tighten belts amid bankruptcy fears

We’re only into the second quarter of 2019 and it seems clear that this could be the year of the chain-retail-store bankruptcy. According to market analysts, retailers in the U.S. have reported the planned closure of nearly 6,000 stores.

The total number of closures exceeds those seen last year, and the trend is expected to continue into the foreseeable future. While a great many of these closures are due to bankruptcy filings by some major retailers, others are cost-cutting measures by chains trying to stay profitable as consumers are increasingly shopping online.

Weintraub, Selth & Nguyen, APC | 11766 Wilshire Blvd., Suite 1170 | Los Angeles, CA 90025 | Phone: 310-584-7702   | Map & Directions