- Decreased demand: Changes in customer preferences and competition from nimble, data-driven businesses can reduce market share.
- Cash flow shortages: Poor working capital management—such as late payments, excess inventory, or bad debts—can strain resources.
- Ineffective debt management: Borrowing to cover shortfalls can lead to unsustainable interest payments.
- Leadership challenges: A lack of experienced management may prevent businesses from adapting to market changes.
- Fraud and cyberattacks: Smaller businesses are often less equipped to absorb losses from scams or cyber incidents.
- Chapter 11 (Reorganization): Allows businesses to restructure debts and continue operations.
- Chapter 7 (Liquidation): Involves selling assets to repay creditors, with remaining debts typically discharged.
- Chapter 13: Available to sole proprietors or self-employed individuals, with stricter income and debt thresholds than Chapter 11.
- Simplified reorganizations: Eliminating procedural hurdles and lowering costs for small business debtors.
- Flexible debt repayment: Administrative expense claims can now be paid over the life of the plan rather than upfront.
- Residential mortgage modification: Small business owners can restructure mortgages tied to business purposes.
- Quicker discharges: Debts can be discharged after completing a repayment plan in 3–5 years.
- Budget preparation: Developing viable reorganization plans or identifying ways to avert bankruptcy.
- Debt restructuring: Negotiating with creditors to create manageable payment terms.
- Financial analysis: Assessing assets, liabilities, and financial statements for court or IRS requirements.
- Tax compliance: Ensuring adherence to federal and state tax regulations during and after bankruptcy proceedings.