Restaurant Chapter 11 Reorganizations and Chapter 7 Liquidations
As many restaurant owners in Rhode Island know, business can be tough at certain times of the year. Given that much of the economy is based on tourism during the spring, summer, and fall months, the “off-season” of winter can be difficult for small business owners and restaurant owners in particular. If you are having difficulty paying your restaurant’s debts, and you find yourself going into more debt to keep the restaurant open, it might be time to think about whether filing for bankruptcy is right for you.
Chapter 11 Bankruptcy allows you to keep your restaurant open while reorganizing your debts. Rather than liquidating the assets of your restaurant, you develop a repayment plan that will provide your creditors with a certain amount of what you owe, and you will be able to get back on track. Many restaurant owners in Rhode Island decide to file for Chapter 11 bankruptcy instead of Chapter 7 bankruptcy because it allows them to keep the restaurant open, and to give themselves a path to making their business profitable again in the future. Filing for Chapter 7 bankruptcy, differently, requires the restaurant to close and for the owner to liquidate assets in
order to repay creditors.
One of the most important questions in determining whether Chapter 11 bankruptcy is right for your situation is whether your restaurant or small business will be viable once the repayment plan associated with your bankruptcy comes to an end. In other words, you need to ask yourself how you ended up in a situation that required bankruptcy in the first place. Did you have a major unexpected series of expenses that left you in debt? Did your business plan fail to account for Rhode Island’s dipping tourism during the off-season, and you have found a way to counteract that issue in the future?
If the business is not viable, it could make more sense to liquidate assets earlier on if
there is a possibility that you may have to do so in the future. We can certainly discuss the most effective way to wind down and close your business.