In the Triangle Business Journal article “Triangle attorneys: New Chapter 11 bankruptcy program could be vital for small business,” Smith Anderson bankruptcy attorney Jeb Jeutter comments about the financial challenges so many businesses are facing due to the Coronavirus and offers tips on how to handle the “unknown.” Jeb expressed that, although bankruptcy reorganization filings in North Carolina have been relatively flat, he does expect an upturn in filings to occur in the fourth quarter and into 2021.
The article reported a new bankruptcy program available, Subchapter 5, a section of Chapter 11 reorganization that has been deployed in the Eastern District of North Carolina targeted to help small and vulnerable companies save tens of thousands of dollars. Sub 5 filings are much less expensive and are much faster for small businesses with revenues at or below $2.7 million to get a reorganization plan sent out to creditors than traditional reorganizations.
“Chapter 11 gives businesses a little bit of breathing room for paying creditors, but they still have to establish a plan for how to pay their creditors – filing a Chapter 11 doesn’t create cash,” said Jeb. “If you’re sitting there as a business owner right now and your business doesn’t have cash, it’s not like your lender is going to provide you cash to reorganize. I think a lot of businesses are stalled, and they’re not sure whether they’re going to have anything to reorganize or not.”
Jeb also noted that companies are smart to wait, as filing a Chapter 11 introduces mandatory timelines.
“You’re kind of on a treadmill once you file and, if you’re not operating and you don’t have cash, what do you do,” he said. “The best thing is to adopt that wait-and-see approach.”
TBJ subscribers can read the full article here.
The Triangle Business Journal (TBJ) is the leading source of business news and events covering all industries in Raleigh, Durham and Chapel Hill, North Carolina and the surrounding areas. The Business Journals report on local and national issues that impact businesses and are a division of the American City Business Journals (ACBJ), the largest publisher of metropolitan business newsweeklies in the United States.