Many restaurateurs are struggling with debt and loans and that was even before the Coronavirus. On March 17, 2020 New York’s bar and restaurant community was ordered to close their dining rooms to stem the spread of the novel coronavirus and a timeline for reopening was left to-be-determined. Now restaurateurs are trying to deal with changing regulations and shifting priorities.
Should My Restaurant File for Chapter 11?
You may have heard that Chapter 11 bankruptcy allows you to keep your restaurant open while reorganizing your debts. Rather than liquidating your restaurant’s assets, Chapter 11 bankruptcy allows you to develop a repayment plan that will provide your creditors with a certain amount of what you owe. The Plan of Reorganization assures creditors are treated fairly while giving you an opportunity to get back on track. Chapter 11 bankruptcy appeals to restaurant owners because it allows you to stay open while you develop a plan to make your restaurant profitable.
Can You Conceive of a Viable Repayment Plan?
If you are considering filing for Chapter 11, odds are your creditors already have an idea that you are in financial distress. One must ask themselves, “Do I currently have creditors who would agree to a repayment plan in order to keep my restaurant open?” Without the consent and assistance of creditors, the path to reorganization will be much more challenging. Most importantly, can you envision changes to your policies and procedures or menu that will make reorganization feasible given the typical earnings of the restaurant?
Will the Restaurant Be Viable in the Future?
If you are confident the reorganization is feasible, you must consider if your restaurant will be viable once the repayment plan associated with your bankruptcy comes to an end. If for instance, you can identify a situation that required bankruptcy in the first place and that situation can be mitigated or avoided in the future, Chapter 11 Reorganization may be right for you.
Don’t wait too long
The most common mistake any small business makes is waiting too long to seek guidance. Consider discussing reorganization a trusted bankruptcy specialist (such as Gleichenhaus, Marchese & Weishaar) to determine if Chapter 11 is the best route to take. Timing can make or break a case, particularly if your restaurant experiences seasonal fluctuations. Many entrepreneurs attempt to navigate their problems to try to avoid the cost of hiring an attorney and, by failing to seek help early, ruin their chances of a successful reorganization.