Passed into law on October 17, 2005, the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) dramatically changed the bankruptcy rules for consumers and businesses. This landmark bankruptcy law has made it more difficult for consumers and small businesses to file for bankruptcy. BAPCPA defines small businesses as those businesses possessing less than $2 million in debt.
BAPCPA includes more reporting requirements and additional paperwork. These administrative changes for bankruptcy filings make bankruptcy a more arduous and time taking process than most business owners are willing to deal with.
If a judge believes a company does not have a good chance of remaining solvent after reorganization under a Chapter 11 bankruptcy filing, they can move the case to a Chapter 7 bankruptcy. Moreover, sole proprietors might have to file bankruptcies as individuals.
Bankruptcy now represents a less viable option for businesses that have accumulated substantial debt. Businesses need to implement one or more bankruptcy alternatives, such as participation in an out of court debt relief program managed by a debt settlement company.
You do not need a high degree of sophistication to understand that bankruptcy alternatives exist which may keep you in business, or at the very least, give you more time to get your business finances in order. Some of these bankruptcy alternatives are:
Ending lender and debt collector calls
There are federal and state statutes and regulations which are designed to protect consumers and may place limits on where, when and how lenders and debt collectors may contact debtors. We assist small business owners by formally contacting lenders or debt collectors and getting them to stop contacting you.
Ending lender and debt collector phone calls does not mean you are in the clear. However, this strategy gives you more time to improve your negotiating position and financial status.
Debt collectors dislike one consumer behaviour more than any other consumer behaviour: Silence. If you remain in constant communication with lenders, creditors or debt collectors, you have a much better chance of negotiating a settlement of your business debt.
Many lenders, creditors and debt collectors accept debt repayment proposals that are less than the total amount of debt owed. Debt negotiations also buy you more time to review your options thoroughly.
Work with a credit counseling agency
You might not have the confidence to negotiate with a lender, creditor or debt collector on your own. A credit counseling agency employs highly trained professionals that not only possess professional negotiating skills, but also understand what makes lenders, creditors and debt collectors tick.
You can also receive sound financial advice from a credit counseling agency to help you repay most, if not all of your debts, as well as restructure your business finances and enhance your business credit profile.
Business owners must avoid one bankruptcy alternative: Do nothing. Turning around a business debt problem requires a disciplined approach to budgeting, invoicing, and purchasing. Although some customers avoid bankruptcy by doing nothing because they are considered “Judgment Proof,” the same cannot be said for most businesses mired in considerable debt.
Changes in bankruptcy laws have made it more difficult for businesses to seek bankruptcy relief. However, several bankruptcy alternatives exist to help you remain in business by improving your finances.