Stimulus checks are on their way. Business loans are being funded. We still do not know, however, when this will all end. This is the very reason it is important to consider what your financial situation in the upcoming months will be. If your business’s financial situation does not improve, you may need to consider filing for bankruptcy. For this reason, Feher Law wants to let you know what the costs of your business filing bankruptcy with us will be.
Businesses can file either a Chapter 7 or a Chapter 11 bankruptcy.
Chapter 7 bankruptcy
When a business files a Chapter 7 bankruptcy, the business will shut down and liquidate. The business will no longer exist and cannot continue its operations. A Chapter 7 business bankruptcy case usually lasts about 12-18 months.
The costs involved in filing a Chapter 7 bankruptcy include:
- Attorney’s fees – All attorney’s fees vary by experience of the attorney and the complexity of the case. Currently, Feher Law’s business bankruptcy fees begin at $2,500.00.
- Filing fee – The current filing fee for a Chapter 7 bankruptcy is $335.00. This amount is paid directly to the Bankruptcy Court at the time of filing your case.
Feher Law’s current minimum fees for a Chapter 7 bankruptcy is $2,835.00.
Chapter 11 bankruptcy
When a business files a Chapter 11 bankruptcy, the business will reorganize, create a plan to address its debt, and come out of bankruptcy able to continue. A Chapter 11 business bankruptcy case is usually active for 18-24 months. Once a Chapter 11 reorganized plan is confirmed by the court, the case may be administratively closed. At that point, the Chapter 11 case is no longer active. Once a Chapter 11 case is completed and all required payments are made, the Chapter 11 case is reopened to obtain a discharge for the business. Once a business receives a bankruptcy discharge, the discharge signifies to the all creditors that the case is completed and all debts are reorganized.
The costs involved in filing a Chapter 11 bankruptcy include:
- Attorney’s fees – All attorney’s fees vary by experience of the attorney and the complexity of the case. Currently, Feher Law’s business bankruptcy fees begin at $7,500.00. This amount includes $2,500 for the pre-petition work required to prepare the case for filing. The remaining $5,000 is placed into trust and held for the business. After the business bankruptcy case is filed, hourly billing begins. All post-filing fees must be approved by the bankruptcy court. Any additional amounts due and owing will need to be paid from the business debtor to Feher Law.
- Filing fee – The current filing fee for a Chapter 7 bankruptcy is $1,717.00. This amount is paid directly to the Bankruptcy Court at the time of filing your case.
- Trustee fees – Each quarter, the business will need to pay fees to the United States Trustee’s office for the administration of the Chapter 11 case. The minimum quarterly fee is $325.00 and increases depending on how much money is disbursed from the business each quarter.
Feher Law’s current minimum retainer for a Chapter 11 bankruptcy is $9,217.00.
A Chapter 11 case is extremely paper heavy, detailed, and small business cases move quickly. In order to be a business in bankruptcy, you will be called a “Debtor In Possession” of your business. You will need to obtain a new Federal Employer Identification Number and a new bank account. You will need to have all your paperwork organized and ready to go.
In order to file a business bankruptcy, a business needs to have their paperwork organized and up to date. This includes:
- Filed tax returns for the last three (3) years
- Bank statements for the last six (6) months
- Profit and Loss statements from the beginning of the current year through the end of the prior month
- An inventory of the things your business sells (if you sell clothes, you need a list of all of the items of clothing you have; if you are a hair stylist and you sell products, you need a list of all the items you sell; etc.)
- A list of the things your business owns (if you sell clothes, do you own the fixtures, a cash register, a vacuum cleaner, etc.? if you are a service provider, do you have computer, printer, etc.; does your business have furniture, technology, etc.?)
- A list of your debts (list everyone the business owes money to – including the IRS, a sales tax owed, credit cards, etc.)
- For your list of debts, if anyone else cosigned on or is obligated on the debt, you need to provide that person’s name and address.
- This could include any personal guarantees that you, as the owner, made for any business asset or debt.
- A copy of your lease or any other agreement with any other business or person regarding your business (this could include a sublease, a vehicle lease, an office lease, a furniture lease)
- Any accounts receivable – or money that the business expects to receive in the future.
In some cases, there may also be additional costs and fees which could include:
- Appraiser fees – if you do not have an inventory, an accurate inventory, or a recent inventory, you may need to hire an appraiser to come in and value the things your business has.
- Actuary fees – if you have amounts that could be coming into the business, but you are not sure as to those amounts, you may need an actuary to determine present value amounts. (For example, if a business has contingency or settlement funds coming into the business at some future date, an actuary can give the value of those funds as of the date of filing).
Business bankruptcies are much different than individual bankruptcies. It is important to find an experienced attorney who knows what needs to happen, can accomplish it quickly, and can counsel you on various options. If your situation leads you to filing for bankruptcy, we are here to help you along the way.