U.S. bankruptcies reached their nastiest levels of this decade in 2020 as the Covid-19 outbreak toppled global businesses and companies in financial distress faced breaking points. The key drivers for this crisis were falling consumer demand, reduced spending on entertainment, and stay-at-home orders forcing businesses to stay closed. Even though the economy is slowly reopening in some states, social distancing measures are impacting clubs, restaurants and stores’ capabilities to return to usual business

1. Considering Bankruptcy as a Solution during
the Covid-19 Outbreak

2. U.S. bankruptcies reached their nastiest levels of this decade in 2020 as the Covid-19
outbreak toppled global businesses and companies in financial distress faced breaking
points.
• As per reports, nearly 630 companies declared bankruptcy in 2020.
• Many high profile companies, especially those relying on consumer-spend; found
themselves into deep financial distress as the Covid-19 crisis depressed economic activity.
• From iconic stores to malls, airlines, and entertainment houses, Covid-19 spared no one
from the devastation.
• The key drivers for this crisis were falling consumer demand, reduced spending on
entertainment, and stay-at-home orders forcing businesses to stay closed.

3. • Even though the economy is slowly reopening in some states, social distancing
measures are impacting clubs, restaurants and stores’ capabilities to return to usual
business.

4. What does corporate bankruptcy mean in such a scenario?
 Several retailers have sought or are seeking bankruptcy protection during this
corona virus pandemic.
 Businesses have 2 options:
1. Chapter 7 bankruptcy - Under this Chapter, the company will lose control of
its business as some or a good part of it will be sold by a third party trustee to
meet the company’s debts.
1. Chapter 11 bankruptcy – Here the company has a chance to restructure its
business by reorganizing debt and safeguard its costly real estate.

5. How Chapter 7 can affect businesses
• Filing for Chapter 7 bankruptcy helps companies wind down their businesses and
even help start a business in MD.
• But it is unlikely that Chapter 7 will allow things to function the way you want to.

6. Here are a few things to keep in mind.
 With Chapter 7 bankruptcy, a company cannot reorganize. It is a liquidation
bankruptcy that closes business in a transparent manner.
o A trustee is appointed to administer the case and assess the inventories and
company property.
o The trustee sells the assets and disburses the proceeds to creditors as required
by the priority rules.
o Many small businesses that have closed shop due to Covid-19 may not be able to
reopen with the economy, and many owners may resort to Chapter 7 as the
option to get rid of the debt.

7.  But the owners may not realize that a defunct business may not be eligible to a Chapter 7
discharge.
 Even with Chapter 7, the stakeholder can still be found personally liable for business debt.
 Chapter 7 is not so simple. Business owners must determine if an individual Chapter will work
for them.
 Under these circumstances consulting with a business bankruptcy lawyer is crucial.
• A competent firm like Rowena N Nelson can meet a company’s expectations using different
approaches like settling debt outside of bankruptcy.

8. How Chapter 11 bankruptcy can help businesses
 Chapter 11 is a process that offers a business an opportunity to reorganize, stay
open and pay debts over a period of time.
 Chapter 11 is generally considered very complex; so many companies are reluctant
to pursue it.
 But it is the best option for companies that are finding it hard to remain in business
during this Covid-19 outbreak.

9.  The key benefits of filing for Chapter 11 during this pandemic are:
o Companies can continue to stay in business during bankruptcy.
o Companies get a longer duration to pay off debts.
o Chapter 11 can function faster than other types of bankruptcy.
o Business owners will continue to stay in control over their company affairs.

10. You must prepare your business to reopen after the Covid-19 outbreak.
 While going ahead to start a business in MD after the government allows or whenever
the pandemic eases, you must shift your focus to several changes.
 Think strategically about your business. You may have to put in practice crowd limits
and social distancing practices.

11. Law Office Of Rowena N.Nelson,LLC
1801 McCormick Drive Suite 150
Largo Maryland, 20774
Office - 301.358.3271
Fax - 877.728.7744

12. THANK YOU