Debt Relief Solutions For North Carolina Businesses

Most businesses incur debt in order to thrive and compete. When debt mounts and profitability stalls, businesses risk insolvency and closing. The good news for business owners facing overwhelming debt is that the bankruptcy code offers your business a path out of debt and a chance at a better, more prosperous future.

Gillespie & Murphy, P.A. assists businesses throughout eastern North Carolina with debt relief solutions. With offices in New Bern, Wilmington, Greenville, and Jacksonville, we can help you explore all debt relief options so that you can decide which path is best for the future of your business.

Should Your Business File for Bankruptcy?

Businesses risk insolvency when their debts are too high, but the bankruptcy code provides several ways for a business to resolve its debts and remain in business. If your business is deeply in debt, you should speak with a North Carolina business bankruptcy attorney.

Effectively advising and representing a North Carolina business that is in financial trouble requires a bankruptcy attorney who:

1.  is an experienced negotiator and litigator
2.  has a comprehensive knowledge of what a business may accomplish through bankruptcy.

When should you contact a North Carolina business bankruptcy lawyer? What are the consequences of filing for a Chapter 11 business bankruptcy?

Is Bankruptcy the Right Choice for Your Business?

Just because a business is struggling with debts does not necessarily mean that a business owner should file for bankruptcy. A bankruptcy lawyer can help many businesses avoid bankruptcy by negotiating payment plans or other favorable and appropriate financial arrangements.

Your bankruptcy attorney will explain the pros, cons, and costs of a business bankruptcy. Then, based on a review of your company’s financial circumstances, your attorney will help you develop the best strategy for resolving the company’s debts.

Frankly speaking, bankruptcy is a last resort. However, if bankruptcy becomes the best option for dealing with the debts incurred by your business, your North Carolina bankruptcy attorney will help you with the task of restructuring the company’s obligations and debts.

What Are the Options for a Business Bankruptcy?

If you want to stay in business, your business may need to file a Chapter 11 bankruptcy (as outlined by Chapter 11 of the U.S. Bankruptcy Code). Businesses that file for bankruptcy under Chapter 11 may be able to continue operating after a debt reorganization plan is approved. Small businesses (with less than $2,725,625 of certain debt) have the option of filing a traditional Chapter 11 bankruptcy (which requires some creditor approval to be confirmed by the bankruptcy court) and Subchapter V Chapter 11 bankruptcy, to which a Chapter 11 Trustee is appointed.

The small business debt limit was increased in 2020, and on March 14, 2022, Senator Charles Grassley of Iowa introduced a proposal that would make permanent the $7.5 million debt limit for small businesses that only had temporary status under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) for the last two years. However, as of April 2022, the debt limit for filing a Chapter 11 bankruptcy has reverted to its original $2,725,625 figure. If you file for a business bankruptcy, make sure your attorney is up-to-date regarding the law, and discuss with your attorney the current law and the allowable debt limit.

A Chapter 12 bankruptcy is specifically for family fishermen and family farmers. In many respects, a Chapter 12 bankruptcy is comparable to a Chapter 13 “personal” bankruptcy, but Chapter 12 bankruptcies specifically address the challenges facing family fishermen and farmers.

As a business owner, you have many decisions to make regarding your debt. Our attorneys will work with you to understand your business so that we can tailor a debt relief plan uniquely suited to your needs and goals.

How Does a Chapter 11 Business Bankruptcy Work?

A Chapter 11 bankruptcy is a “reorganization” that involves reorganizing a company’s business affairs, assets, and debts. Chapter 11 bankruptcy is most often used by businesses, but Chapter 11 bankruptcies are also available to some individuals in some circumstances.

In a Chapter 11 business bankruptcy, the business that is filing for bankruptcy remains in control of its operations and is not required to liquidate its assets. The business may continue to operate and to generate a cash flow to pay its ongoing bills, and eventually its debts under a new payment plan.

A Chapter 11 bankruptcy begins by filing a petition with the bankruptcy court. Your bankruptcy attorney will handle the legal paperwork on your behalf. A bankruptcy petition is usually voluntary and filed by the debtor, but it may also be an involuntary petition filed by creditors.

How Does an Automatic Stay Work?

The current bankruptcy court filing fees for a Chapter 11 bankruptcy are $1,167 (filing fee) and $571 (administrative fee). The fees are due upon filing. When a Chapter 11 bankruptcy is filed, the bankruptcy code institutes an “automatic stay.”

While an automatic stay is in effect, all collection activities, repossessions, and foreclosure actions are suspended and may not be pursued by creditors on any debt or claim that arose before the company’s bankruptcy petition was filed.

An automatic stay provides a “breathing spell” during which negotiations with creditors can take place and a repayment plan can be developed. Creditors often work with Chapter 11 bankruptcies because they may recover through the repayment process most if not all of what they are owed.

What Is a Bankruptcy Administrator? What Is a Creditors’ Committee?

In North Carolina, a bankruptcy administrator monitors the progress of a Chapter 11 bankruptcy and supervises its administration. The administrator is responsible for monitoring the operation of the business and is a party to all proceedings in the Chapter 11.

A creditors’ committee may also play a role in a Chapter 11 bankruptcy. The committee is appointed by the bankruptcy administrator and consists of the unsecured creditors who hold the unsecured claims against the debtor, if enough unsecured creditors request that a committee be formed.

The company’s owner must submit a disclosure statement and a reorganization plan to the court, often within 90 days of the bankruptcy filing. When a plan of reorganization is proposed, the affected creditors may vote on the plan. The court may then approve the plan if it gets the required creditor votes and satisfies other legal requirements.

A Chapter 11 bankruptcy often takes several months but the process is designed to resolve the bankruptcy in a timely manner. If the business does not timely file a plan of reorganization, and after a certain period, creditors can file an alternate plan.

What Else Should You Know About a Business Bankruptcy?

A business owner should only consider a Chapter 11 bankruptcy after a careful exploration and review of the alternatives. Better options may be available for small and mid-sized businesses, so it is important to discuss your options with a North Carolina business bankruptcy attorney.

If you choose a Chapter 11 bankruptcy for your business, by carefully re-establishing and managing the business and by paying any new debt, you may be able to repair the company’s credit and remain in operation and eventually prosper.

A business bankruptcy may involve selling properties, terminating leases, and paying creditors over time. Your lawyer will ensure that you fully understand the bankruptcy process and will guide you through that process and toward the financial and business goals you hope to achieve.

Speak With An Experienced Business Bankruptcy Lawyer

If your business is drowning in debt, you cannot wait one more day. Make the call and arrange at once to discuss your business debts and business circumstances with a North Carolina business bankruptcy lawyer. For a free initial consultation with an experienced lawyer for bankruptcy in North Carolina, contact our law firm online or by telephone at 252-659-5045.