Chapter 11 Bankruptcy Providing Some Relief to Pandemic Pressure

file for bankruptcyA year into the pandemic, bankruptcy remains an important option for business owners and operators.


Recent bankruptcy filing statistics reveal March 2021 saw the highest spike in combined commercial and non-commercial bankruptcy filings since the start of the pandemic. Filing for bankruptcy can provide needed relief from overwhelming debt.


A recent piece in The Washington Post discusses the plight of commercial interests that have held on throughout the pandemic but are beginning to falter. The Post notes bankruptcy filings for oil and gas, entertainment, software, retail, food service, and real estate companies were up by at least 50 percent in 2020. Chapter 11 filings, used to restructure the debt load of a potentially viable commercial interest, were up approximately 30 percent from the previous four years.


While a strong recovery is expected from the pandemic, no one is quite sure what recovery looks like and when it happens. Recent stimulus spending promises to boost the economy and carry businesses over to the retail rebound expected when vaccination rates are much higher.


Each chapter of the bankruptcy code is intended to give individuals and businesses a restart when they are struggling with untenable financial circumstances.


For many businesses, Chapter 11 continues to provide structure and debt relief needed to turn around a business near the brink. A couple of features of a Chapter 11 bankruptcy filing include:

  • A Chapter 11 filing allows a business owner to maintain some control of their business during and after the bankruptcy process. A Chapter 7 filing essentially turns the business and its assets over to the bankruptcy trustee for liquidation of assets to pay creditors.
  • Chapter 11 is a reorganization bankruptcy that gives business owners a relief from debt collection while they work with the trustee and creditors to repackage debt and possibly shed unworkable agreements.
  • After exiting Chapter 11 bankruptcy, many businesses regain agility to deal with market conditions and the ebb and flow of the business slowdown caused by the pandemic.


There were approximately 6,917 Chapter 11 bankruptcy filings last year, and the pace and need for business reorganization has not slowed in 2021. If your business bottom line continues to sink, Chapter 11 may provide the options you need to reassess use of assets and redirect your company toward survival.


The economic upheaval caused by the pandemic is not near its end. When you need more options than waiting it out, speak with a tax attorney with experience who can successfully guide you through the bankruptcy process.


Cleveland tax lawyers offer experienced advice on options for addressing business downturn

The tax group at Robert J. Fedor, Esq., LLC represents business and individual clients dealing with business stress, tax litigation, and allegations of tax crime. When experienced tax advice is needed locally or internationally, call 800-579-0997 or contact us for a free consultation.


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