Bankruptcy filings declined in the first months of 2021 throughout Arizona. However, as the economic protection plans such as forbearance moratoriums, stimulus checks, and small business loans expire, a slew of bankruptcy protection filings in the state may occur.
Because of the pandemic, paying creditors may be delayed, but not all debts are completely forgiven. For those thinking about filing for bankruptcy protection, here are some important facts to consider.
Recent changes to bankruptcy law spurred by the pandemic have helped small business owners in Arizona keep their businesses afloat while keeping creditors at bay.
Chapter 11 bankruptcy allows businesses to reorganize while negotiating repayment plans with creditors, but the process can take up to five years. In order to make it easier, quicker, and more affordable for small businesses, subchapter 5 of Chapter 11 of the U.S. Bankruptcy Code was added last year.
Subchapter 5 was added prior to the pandemic, in 2019. When subchapter 5 was added, it was available only to businesses with less than $2.7 million in debt. With the passage of the stimulus bill known as the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, the amount of debt businesses could carry was raised to $7.5 million.
Normally, Chapter 11 bankruptcy is a multi-step process that includes a disclosure statement. A disclosure statement contains information pertaining to the petitioner’s assets, liabilities, and business affairs “sufficient to enable a creditor to make an informed judgment about the debtor's plan of reorganization,” reads a section of Chapter 11 bankruptcy code.
Arizona business owners who have less than $7.5 million in debt do not have to file and obtain approval of a disclosure statement under subchapter 5.
Similar to an individual filing for Chapter 13 bankruptcy protection, a small business owner filing in Arizona under subchapter 5 can restructure their debt repayments in three to five years. Meanwhile, the small business owner can keep their business afloat.
Small business owners will also have the advantage of having a trustee negotiate with creditors on their behalf.
There are other advantages for small business owners in the Grand Canyon State who have debts and file under subchapter 5 bankruptcy protection.
If you want the best possible outcome in your proceedings, you should consult a bankruptcy attorney.
A bankruptcy attorney can advise you on the right bankruptcy chapter for you, help you navigate the forms and bylaws governing bankruptcy in Arizona, and help you exempt or preserve more property than you may have been able to on your own.
The best place to find a bankruptcy attorney is Attorney at Law.
At AAL, our network of law firms and attorneys allows us to match you with a bankruptcy attorney in your area of Arizona. Our partners have the resources, legal expertise, and experience to help you achieve the best possible outcome in your bankruptcy filing.
In addition to a distinguished record, our partners excel in client care. We understand the stress of filing for bankruptcy. That’s why our partners strive to make the process as quick and efficient as possible while keeping you updated the whole way.
Don’t wait. Contact AAL today for a free, no-obligation consultation and begin your journey to financial freedom.