Involuntary Chapter 7 for a Tampa Small Business
When you are struggling to keep your small business in Tampa afloat, the prospect of facing a lawsuit from a creditor or debt collector can be extremely stressful. You may even be considering the possibility of Chapter 11 bankruptcy for your business in order to reorganize your debts and to get caught up on payments while still keeping the doors of your restaurant, bar, or other small business open. But what happens if your business owes a significant amount of money to a debtor? In other words, can a creditor or debt collector take actions beyond a lawsuit in order to recover the money owed? In short, the answer is “yes” in some cases. Depending upon the specific facts of the case, it may be possible for a creditor to force a business debtor into a liquidation bankruptcy.
If you own a small business in the Tampa Bay area, you might be wondering, “can a creditor really and truly force my business into Chapter 7 bankruptcy?” In certain situations, a process known as “involuntary bankruptcy” may be possible, and it is essential to understand how an involuntary bankruptcy could impact your company. The following are some important things to know about involuntary bankruptcy for small businesses in the Tampa Bay area.
Involuntary Bankruptcy is Only Allowed Under Chapter 11 or Chapter 7
Under the U.S. Bankruptcy Code, involuntary bankruptcy is only permitted under Chapter 11 or Chapter 7. Accordingly, an individual cannot be forced into an involuntary Chapter 13 bankruptcy (although both individuals and businesses can be subject to an involuntary bankruptcy). To be clear, an involuntary bankruptcy can occur when a creditor is angry or frustrated about a business failing to make payments on a debt, and that creditor may seek an involuntary Chapter 7 bankruptcy to recover some of what it is owed while forcing the business to close down.
Involuntary Bankruptcy is Only Possible for Certain Types of Businesses
Only certain types of businesses can be subject to an involuntary bankruptcy under the U.S. Bankruptcy Code. While many businesses can be subject to an involuntary Chapter 7 bankruptcy, you should know that family farms, non-profit organizations, insurance businesses, and certain government entities cannot be subject to an involuntary bankruptcy. If your business falls into any of these categories, an involuntary bankruptcy may not be lawful.
Creditor Must Be Able to Prove a Business is Using Assets Without Paying Debts, and Involuntary Bankruptcy is Necessary
A creditor cannot simply file an involuntary bankruptcy petition for a Chapter 7 business bankruptcy without good cause. In order for this kind of involuntary bankruptcy petition to move forward, the creditor must be able to prove one of the following:
- Business is not paying its debts; or
- Business’s property has been frozen by a lien.
If there are more than 12 unsecured creditors associated with the business, the involuntary bankruptcy petition must be filed by at least three of those unsecured creditors who must be owed $16.750 or more. In situations where a single creditor is owed $16,750 or more, that creditor alone also can be eligible to file an involuntary bankruptcy petition.
Contact a Business Bankruptcy Lawyer in Tampa
If your business is facing an involuntary bankruptcy proceeding, it is important to speak with an experienced Tampa Chapter 7 bankruptcy lawyer to learn more about your options. It is important to remember that a creditor cannot simply move forward with an involuntary bankruptcy case without providing evidence of its necessity. We can assess the particular facts of your case and can analyze your business’s financial situation to help you determine the options that may be available to you. Contact Tampa Law Advocates, P.A. to learn more about how we can assist you.