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Pandemic’s Economic Effects Have Many Reviewing Bankruptcy Options

The COVID-19 pandemic has led to an onslaught of bankruptcies in Texas and all over the United States. The economic devastation of the pandemic has caused financial ruin to both large national brands and small Texas businesses in every sector of the economy. Struggling business owners who are considering bankruptcy should know what their options are.

There are three common types of bankruptcy filings: Chapter 7, Chapter 11 and Chapter 13. A Chapter 7 bankruptcy can be used for individuals or business entities. A Chapter 11 bankruptcy is typically used by businesses. A Chapter 13 bankruptcy can be filed by individuals and sole proprietors.

Chapter 7 bankruptcy is a liquidation bankruptcy where the filer’s assets can be sold to help pay off debts. In order to qualify for a Chapter 7 bankruptcy, filers must have a low enough income to qualify under what is called the “means test.” At the end of the process, nonexempt debts, such as credit card balances and medical bills, are discharged. The drawback is that this type of bankruptcy does not provide a way for debtors to catch up on missed payments to avoid repossession or foreclosure.

Chapter 11 bankruptcy is a reorganization plan geared toward businesses that want to keep the doors open while working out their debt obligations. The debtors submit a plan to the bankruptcy court and a committee of creditors that might include internal operation changes and the restructuring of existing debt terms. Unlike a Chapter 13 bankruptcy, there is not a cap on the amount of secured and unsecured debt permitted to file.

A Chapter 13 bankruptcy creates a repayment plan for individuals or sole proprietors. The debtors may keep their assets but are required to make payments on unsecured debts for three to five years. This type of bankruptcy also provides a way to catch up on missed payments in order to avoid repossession or foreclosures. The unsecured or secured debt must not exceed a certain threshold amount, determined each year.

It is also important to realize that the CARES Act passed in March 2020 provides some relief to debtors who file for certain types of bankruptcies until March 2021. If you are considering filing for bankruptcy, it is important to consult an experienced bankruptcy attorney who can help you determine what  options works best for you.

If you are struggling with debt and considering filing for personal or business bankruptcy in Texas, the knowledgeable team of lawyers at Hayes, Berry, White & Vanzant, LLP can help. We have offices in Denton, Flower Mound. Gainesville and Celina. Call us at 940-230-2386 or contact us online.

  • "Absolute best in the business hands down! Don White is absolutely amazing wouldn’t ever consider using anyone else, we highly recommend this firm!" - Alyssa McKissaack

  • "The best! Richard has been my family’s attorney for 35 years. Integrity best describes Richard Hayes." - John Grafa

  • "From my first meeting with Mr. Berry and his staff, I was immediately relieved. The bankruptcy process was explained to me simply and objectively and I was made to feel at ease through the entire ordeal. I was especially impressed by his helpful and knowledgeable assistant, Jackie Cox. I would hope to be able to retain Byron Berry for any future needs." - Anonymous

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