Over 16% of American adults (https://entrepreneurship.babson.edu/millions-are-entrepreneurs-in-the-united-states/) are independent entrepreneurs. Are you one of them?
If so, then you already know first-hand how much work it takes to operate your own business. If you’re a sole proprietor, then that also means your business’s income is the same as your personal income.
When your business starts to suffer, so do you. It could mean you’re struggling to pay your off your debts, and it could be pushing you closer to the financial brink. Know that you’re not alone. Businesses filing for Chapter 11 bankruptcies have jumped 26% (https://www.reuters.com/article/us-health-coronavirus-usa-bankruptcy/u-s-bankruptcies-fall-in-april-but-commercial-chapter-11-filings-rise-idUSKBN22H1XZ) compared to last year as a result of the coronavirus pandemic.
Read on to learn the four steps you need to take if you’re considering filing for a Chapter 11 bankruptcy due to covid-19.
1. Take Advantage of Relief Options
Independent contractors have little to no job security. When they lose their job, they usually can’t apply for unemployment benefits. The Covid-19 pandemic and CARES Act (https://www.forbes.com/sites/brucebrumberg/2020/05/01/unemployment-benefits-for-the-self-employed-independent-contractors-and-gig-economy-workers-lawyer-on-the-front-lines-answers-common-questions/#31298a8fd7b6) has changed all that.
Before you consider filing for bankruptcy, consider applying for unemployment. This temporary financial relief may be just what you need to make it through this crisis. You should also take advantage of the $1,200 stimulus check sent by the government.
If you own a small business, then you might also be able to take advantage of economic injury disaster loans (https://www.sba.gov/funding-programs/disaster-assistance/coronavirus-covid-19).
Have you already taken advantage of all the relief options available to you? If so, then it’s time to move on to step two.
2. Audit Your Business Finances
Next, it’s time to take a good hard look at your business’s finances. Filing for bankruptcy should always be considered a last resort. If you can find ways to re-work your budget, then you might not even need to file for bankruptcy at all!
Look at your expenses. Consider your debts. Create a new budget, and analyze whether or not there’s anything you can do to save your business from bankruptcy. If not, then it’s time to move on to step three.
3. Consider the Pros and Cons of Bankruptcy
As with any decision, there are advantages and disadvantages you’ll face if you have to file for bankruptcy. On the plus side, your debts will either get discharged or restructured in such a way that it’s easier to make payments. As a downside, you will suffer a negative mark on your credit report. You’ll also have more difficulty in the future attempting to take out loans or apply for credit cards.
Bankruptcy isn’t a temporary situation. Only make the decision to file if you’ve exhausted all your other options.
If your company is headed towards bankruptcy, then your own personal assets are at risk. To avoid seizures, repossessions, or other collection efforts, you may need to file for personal bankruptcy, too.
4. Ask an Attorney for Advice
Have you already considered the pros and cons of applying for bankruptcy? Are you convinced that it’s the right option for you? If so, then it’s advised you reach out to an expert bankruptcy attorney (https://www.kansascityaccidentinjuryattorneys.com/practice_areas/kansas-city-chapter-7-13-consumer-bankruptcy-attorneys.cfm) before starting your claim.
A bankruptcy attorney will help you determine whether filing is the best financial decision for you and your small business. If it is, then an attorney will help you fill out the appropriate paperwork, collect your financial information, and initiate your claim. They’ll also help ensure the best possible outcome in your bankruptcy case.
Will Your Business Survive the Covid-19 Pandemic?
It’s no surprise that small businesses are suffering due to Covid-19. People were quarantined in their homes for weeks, and thousands of businesses were told to temporarily shut down. Millions lost their jobs.
If your business came out unscathed, then you’re one of the fortunate few. Far more Americans are struggling to keep their business afloat. If you’ve already exhausted your relief options and understand the consequences of filing for bankruptcy, then it’s important to get started on your case as soon as possible. Our bankruptcy attorneys are prepared to help you. Reach out to us now at (888) 348-2616 to learn more about how we can help.