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Small Business Bankruptcy in Missouri

In challenging financial times, many small business owners must decide whether to shut down or seek bankruptcy protection. Bankruptcy may be the best option for business owners who want to discharge existing debts or reorganize.

Talk to your Missouri bankruptcy attorney about your bankruptcy options to protect your business and personal assets. Contact the Joshua Wilson Law Firm today at 816-331-9968.

Bankruptcy Options for Small Business Owners in Missouri

There are a few different bankruptcy options for small business owners, usually referred to by their chapter in the U.S. Bankruptcy Code. These include: 

  • Chapter 7 Bankruptcy
  • Chapter 13 Bankruptcy
  • Chapter 11 Bankruptcy
  • Chapter 12 Bankruptcy

Chapter 11 Bankruptcy for Small Businesses

Chapter 11 bankruptcy is also known as reorganization bankruptcy. This is a common option for larger corporations or partnerships but it is less common for small businesses. Chapter 11 bankruptcy is more time-consuming, complex, and expensive than other forms of bankruptcy. 

Chapter 11 bankruptcy reorganizes the business assets and debts under a trustee. However, it generally allows the business to stay open and continue operating. 

Subchapter V Fast Pass Bankruptcy for Small Businesses

A new subchapter of the Chapter 11 Bankruptcy Code went into effect in 2020. The Small Business Reorganization Act created a faster and less costly bankruptcy option for small businesses, under Chapter 11, Subchapter V. 

To be eligible for Subchapter V bankruptcy, a small business debtor (as an entity or an individual) must be engaged in commercial activity with total secured and unsecured debts of less than $2,725,625.  At least half of the debts must be from business-related activity. When electing Subchapter V bankruptcy, the debtor must submit a balance sheet, statement of operations, cash flow statements, and tax returns. 

Like other Chapter 11 bankruptcy, the court will appoint a trustee. However, unlike other Chapter 11 bankruptcy, the trustee will not take possession of the business assets or sell off the assets. The trustee's role is to advise, review documents, collect payments, distribute payments, and monitor the business operation. 

Subchapter V bankruptcy is much faster and less expensive than traditional Chapter 11 bankruptcy. A status conference is held within 60 days of filing. The small business debtor must file a plan of reorganization within 90 days of filing. Only the business owner can file a plan and not creditors. There is no need for a disclosure statement but the plan includes liquidation analysis, prior business operation information, and demonstration of the ability to make proposed payments. 

Creditors do not need to vote on the plan. Instead, the court can confirm the plan based on: 

  • Finding the small business debtor will be able to make all planned payments; or
  • Finding a reasonable likelihood that the small business debtor will be able to make all planned payments and the plan has remedies to protect the creditors if proposed payments are not made. 

The small business debtor will receive a discharge at confirmation of the plan or after all plan payments are made if the plan is not consensual. Talk to your Missouri bankruptcy lawyer about whether you qualify for Subchapter V bankruptcy. 

Chapter 7 Bankruptcy for Small Businesses

Chapter 7 bankruptcy for small businesses is liquidation bankruptcy. To qualify for Chapter 7 bankruptcy, the small business debtor may be a partnership, corporation, or other business entity. In a Chapter 7 filing, the trustee takes over the business assets, sells the assets or reduces them to cash, and distributes the proceeds to creditors. The process for Chapter 7 bankruptcy from beginning to discharge of debt generally takes 3 to 5 months. 

Chapter 13 Bankruptcy for Small Businesses

Chapter 13 bankruptcy is also known as wage earner's bankruptcy or reorganization bankruptcy. This bankruptcy is generally for individuals but may be available to sole proprietorships that are owned and operated by an individual. 

To qualify for Chapter 13 bankruptcy, the individual can only have a limited amount of secured or unsecured debt. After making the required payments under the payment plan, the remaining debt may then be discharged. The payments for Chapter 13 bankruptcy generally last from 3 to 5 years. 

Family Farm Bankruptcy Under Chapter 12

Chapter 12 bankruptcy is an option for family farmers or family fishing businesses. Chapter 12 bankruptcy allows family farms to propose a repayment plan to pay part or all of their debt in installments over 3 to 5 years. Chapter 12 is less complicated and less expensive than Chapter 11 bankruptcy. To be eligible for Chapter 12, farmers have to have a “regular annual income,” in order to make payments under the plan. However, Chapter 12 makes allowances for farmers who have seasonal income. Other requirements depend on whether the farm is operated by: 

  • An individual or individual and spouse; or
  • Corporation or partnership. 

For an individual or married couple to qualify, they must:

  1. Be engaged in a farming operation; 
  2. Have total debts not to exceed $4,153,150; 
  3. At least 50% of the debts are a fixed amount related to farming; and
  4. More than 50% of gross income must have come from farming. 

In order for a corporation or partnership farm to qualify:

  1. The business must have more than half of the outstanding stock or equity owned by one family or by one family and its relatives;
  2. The family or the family and its relatives must conduct the farming or commercial fishing operation;
  3. More than 80% of the value of the corporate or partnership assets must be related to farming;
  4. Have total debts not to exceed $4,153,150; 
  5. At least 50% of the debts are a fixed amount related to farming; and
  6. If the corporation issues stock, the stock cannot be publicly traded.

Missouri Small Business Bankruptcy Lawyer

Bankruptcy may offer a fresh start for your small business in difficult financial times. If you have questions about filing for bankruptcy in Missouri, contact the Joshua Wilson Law Firm in Raymore today. Contact us online or by calling (816) 331-9968. We maintain a virtual capable law office to keep you safe.

Don't Hesitate To Contact Us Today

Time is of the essence in the majority of legal matters. If you are in need of legal representation for your family or criminal matters, contact The Joshua Wilson Law Firm at (816)331-9968 to begin your case evaluation today.