Small Firm Service. Big Firm Results.
Written by: test test
Friday May 22, 2020


The recent Covid-19 pandemic has had a shattering impact on many businesses. Sales and business income have been reduced and in some instances, entirely eliminated. While layoffs have reduced expenses, continuing fixed expenses, such as rent, mortgage payments, utility bills etc. continue to drain the cash reserves that these businesses were relying upon to maintain their existence.

Consequently, as the pandemic has continued over several months, cash has disappeared, making it harder and harder for these businesses, particularly small family operated companies, to maintain viability.

Eventually, as cash has become no longer available to pay unceasing incoming obligations and debts, business owners in desperation have begun to contemplate that lawful word that they have heard about, but never expected to experience in  their lives– bankruptcy.

What is Bankruptcy?   

Bankruptcy is a legal proceeding carried out to allow individuals or businesses freedom from their debts, while simultaneously providing creditors an opportunity for repayment.

Does Declaring Bankruptcy Mean Necessarily the End of a Business? 

The short answer to that is "no."  There are different types of bankruptcy that apply to different type of parties with varying degrees of severity.

In a "Chapter 11" reorganization, the business owner remains in control of the business and maintains ownership over the property as the “debtor-in-possession.”  The business owner actually continues operating his business while the business, through federal or state court procedures, is able to reach reasonable agreement with creditors as to the businesses’ debts– allowing the business to survive.

Chapter 7” liquidation, on the other hand, is exercised in cases where the business has no viability.   Upon filing in federal court, a business filing for Chapter 7 will surrender all property to the court and a court-appointed "trustee" will orderly work toward accomplishing the sale and disposition of the business assets so as to satisfy the businesses’ outstanding debts to existing creditors.  Creditors range from banks with "secured" mortgages, or "unsecured" creditors who had provided the day-to-day credit for usual and regular purchases as the business operated in the regular course.

What about Individuals?  Can They File for Bankruptcy

Yes, Individuals can also file for bankruptcy.  Generally, "Chapter 13" bankruptcy is accessible to individuals with a regular income and unsecured debt of less than $250,000 and secured debt of $750,000 or less.[1]  Much like Chapter 11, the debtor (in this case the individual) remains in possession of the property, but a court-appointed trustee works with the debtor individual and creditors to orderly resolve indebtedness so that the debtor individual might avoid losing a home, vehicles, or other personal possessions.

Bankruptcy in the Age of Covid-19:

While these mechanisms in bankruptcy have been available for many years, the extraordinary potential legal complications resulting from the Covid-19 pandemic amplify the relevance of these provisions.  This pandemic has brought about issues, defenses and other consequences which are likely to be novel and requiring of the expertise of experienced litigation counsel – whether in representing the interests of the debtor or of the creditor. In the coming months, Americans will be faced with complex challenges, likely involving the overlap of a number of different legal issues.  It is highly anticipated that Covid-19 will play a determinative role in the resolution of contract disputes between a business debtor or a creditor in a bankruptcy/insolvency related legal matter and justify a business's failure to make timely payments or meet its financial obligations.  The crossover of legal issues are extensive, and courts are anticipating a massive influx of bankruptcy proceedings in the coming months, which will undoubtedly cross over into legal areas ranging from real estate, trust and estates, matrimonial and commercial disputes.

In short, never before has is it been more necessary that businesses and business creditors have experienced litigation counsel to advise them and represent their interests – now that the Covid-19 pandemic has disrupted the normal flow of America's business transactions. 

You may be considering bankruptcy. Or, you may be a creditor who cannot collect from a former client or customer who claims insolvency or has filed bankruptcy. Even if you only have questions or concerns about insolvency in general, you can contact our firm by calling us at (866) 265-2550 or by emailing us at  We would be happy to answer any of your questions and help you review your options.

All consultations are of course completely confidential subject to the attorney- client privilege.  


[1] . 11 U.S.C.A. §§ 101(30), 109, 301, 303

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