Business Bankruptcy in Miami

When a small business cannot pay its bills, the owner has several distinct legal options. Each works very differently. Choosing the right path requires an honest look at whether the business is viable in some restructured form, what the personal guarantees look like, and what the owner wants to do next.

The Three Main Paths for a Struggling Business

1. Chapter 7 Liquidation

An entity (corporation or LLC) files Chapter 7 to wind down operations and have a trustee liquidate the remaining assets. The entity does not receive a discharge – Chapter 7 discharge is only available to individuals – but Chapter 7 provides an orderly, court-supervised process to deal with creditors, employees, customers, and remaining assets. The entity ceases to exist when the case closes.

An individual sole proprietor can file Chapter 7 personally to discharge both personal and business debts (because a sole proprietorship is legally the same as the individual). This is often the simplest path for a one-person business with personal liability for everything.

2. Chapter 11 / Subchapter V Reorganization

If the business is viable in a restructured form – meaning it can generate enough cash to pay operating expenses and at least some portion of debt – Chapter 11 or Subchapter V allows the business to continue operating while it negotiates a plan with creditors. Subchapter V is particularly suited to small businesses because it eliminates many of the cost drivers that made traditional Chapter 11 inaccessible to most companies under about $5 million in revenue.

3. Assignment for the Benefit of Creditors (Florida ABC)

Florida has a robust state-law alternative called Assignment for the Benefit of Creditors, governed by Chapter 727 of the Florida Statutes. The business assigns its assets to an independent assignee who liquidates them and distributes proceeds to creditors. ABCs are often faster and less expensive than Chapter 7 for an orderly wind-down, but they do not provide an automatic stay and they do not bind dissenting creditors the way bankruptcy does. We can compare an ABC to Chapter 7 for your specific situation.

Personal Guarantees: The Issue That Drives Most Decisions

For most small businesses, the owner has personally guaranteed the SBA loan, the commercial lease, the line of credit, the merchant cash advance, and often the trade vendors. The entity's bankruptcy does nothing to release those personal guarantees. Often the owner needs a separate personal Chapter 7 or Chapter 13 to address them.

In some cases the right answer is for the entity to wind down through Chapter 7 or an ABC while the owner files a personal Chapter 7 or 13 to discharge the personal-guarantee exposure. In other cases – especially where the owner wants to keep the business operating – a single Subchapter V reorganization can address business and personal debt in one proceeding.

Common Issues in South Florida Small-Business Cases

• Merchant cash advances. MCA companies routinely sue and execute against bank accounts shortly after a missed payment. A bankruptcy filing – either entity or personal – will stay these collection actions.
• Commercial leases. A burdensome lease can be rejected in Chapter 11, capping the landlord's damages claim at the greater of one year's rent or 15% of the remaining rent (not to exceed three years).
• SBA loans. SBA loans can be restructured in Chapter 11 or, in some cases, in a successful out-of-court Offer in Compromise process.
• Payroll tax (trust-fund) liability. Unpaid payroll trust-fund taxes are non-dischargeable for the responsible individuals personally. We address this exposure carefully in business cases.
• Florida sales tax. Unremitted sales tax has its own collection regime and is generally non-dischargeable for responsible individuals.

Schedule a Consultation

Business bankruptcy decisions benefit from early planning. Filing too early can be a mistake; waiting too long is usually worse. Call 786-522-1411 for a confidential discussion of where your business and your personal exposure stand and what options make sense.