Bankruptcy for Restaurants/Bars
Many restaurants and bars fail. A restaurant or bar may fail if its employment taxes are delinquent or if it receives warnings from a regulatory agency. The steps that a restaurant or bar takes once it realizes that it is in financial distress are crucial. Sometimes bankruptcy is the appropriate response to the restaurant or bar’s financial difficulties. If you are concerned about filing for bankruptcy as the owner of a restaurant or bar, you should consult the DuPage County restaurant bankruptcy lawyers at the Bankruptcy Center of Illinois.Bankruptcy for Restaurants and Bars
Restaurateurs and bar owners who wish to file for bankruptcy need to elect among Chapter 7, Chapter 11, or Chapter 13 bankruptcy. This can be a complicated decision that depends in part on how the restaurant or bar is structured as a business. However, the decision may also depend on whether the owner wants to keep the restaurant or bar afloat in hopes that the business can be salvaged and the situation turned around.
One advantage of filing for bankruptcy is that it triggers an automatic stay. An automatic stay means that creditors are not allowed to engage in collection efforts against the restaurant or bar for a certain time period. In some cases, bankruptcy allows a business owner to discharge certain debts. Bankruptcy may have negative consequences for your credit score.Chapter 7 Bankruptcy
Restaurants or bars structured as sole proprietorships may wish to file for Chapter 7 bankruptcy with the assistance of a restaurant bankruptcy attorney in DuPage County. While partnerships, limited liability companies, and corporations can technically file for Chapter 7 bankruptcy, they cannot receive a discharge of their debt through this process. The goal of Chapter 7 for a restaurant or bar is to liquidate the business’ assets so that as many creditors as possible can be paid. The bankruptcy court will appoint a trustee, who will sell all the restaurant or bar’s assets, including its tables, cooking equipment, and real property, and the funds from the sale will be distributed to creditors to repay debts.
During a Chapter 7 bankruptcy, all business activities are halted. The bankruptcy court will determine which creditors should be prioritized for repayment. Usually, a Chapter 7 bankruptcy takes restaurants about six months.Chapter 11 Bankruptcy
Restaurants and bars that want to stay operational may file for Chapter 11 bankruptcy. This route is appropriate when a small business wants to reorganize with the goal of becoming profitable and paying off all its debts. Filing under Chapter 11 allows a restaurant or bar to conserve assets, but it is important to be aware that it can be complicated, time-consuming, and expensive.
Restaurants that file for Chapter 11 bankruptcy are typically given 120 days to create a reorganization plan. The plan will need to include how much creditors will be paid and the amount of time that it will take for payments to be made. Creditors and the bankruptcy judge will need to look over the reorganization plan and approve it in order to move forward; a DuPage County restaurant bankruptcy attorney can help you write a new plan if your plan is rejected. Developing a Chapter 11 plan allows for a more cost-efficient business by the end of the process.Chapter 13 Bankruptcy
Restaurants that are structured as sole proprietorships and want to keep some revenue, but do not have enough to pay off their debts, may file for Chapter 13 bankruptcy. Other business entities, such as corporations, limited liability companies, and partnerships, cannot.
As with Chapter 11, a plan for the repayment of creditors must be submitted to the bankruptcy court when filing for Chapter 13. A Chapter 13 plan takes 3-5 years. There is a confirmation hearing to talk over the proposed reorganization plan with creditors and the bankruptcy judge. If your plan is rejected, you can create a new plan. For instance, if your restaurant or bar is structured as a sole proprietorship, and business slumped because of COVID-19, a Chapter 13 bankruptcy would allow you to hold onto your assets for longer in hopes of surviving the business downturn.Retain Seasoned Bankruptcy Attorneys
Restaurateurs and bar owners face complicated decisions when deciding to file for bankruptcy. It is important to retain a restaurant bankruptcy lawyer in DuPage County to help you navigate this complicated process. If you are considering bankruptcy, you should consult the experienced attorneys at the Bankruptcy Center of Illinois. Call us at (773) 993-0024 or contact us via our online form.