Business bankruptcies are rising, and it’s not just the big names making headlines. We’re seeing small businesses get squeezed by higher borrowing costs, inflation-driven expenses, and customers who simply aren’t spending the way they used to. When cash gets tight, owners often feel forced into quick-fix financing like merchant cash advances, and that can turn a temporary slowdown into crushing monthly debt service.
We sit down with JoAnn Falgout, an experienced bankruptcy attorney, to walk through what actually happens when a business considers bankruptcy and why the answer is often more nuanced than “close the doors.” We talk about personal guarantees and the hard truth that many owners have signed onto business debt with their own credit, their home equity, and their future on the line. JoAnn explains why draining a 401k or IRA to save the company can be a tragic mistake, since retirement accounts are often exempt in bankruptcy, and why early pre-bankruptcy planning can prevent avoidable problems like preferential transfers.
We also dig into Subchapter V Chapter 11, a streamlined reorganization option built for small businesses, including what makes it cheaper, faster, and more realistic than a traditional Chapter 11 for many mom-and-pop operations. Along the way, we compare Chapter 7 liquidation, Chapter 13 repayment plans, and Chapter 11 reorganization, plus what “exemptions” mean in real life for everyday assets.
If you’re a business owner, creditor, or just trying to understand small business bankruptcy and debt restructuring, this conversation gives you a clear framework for choosing next steps. Subscribe, share this with a business owner who needs it, and leave us a review.