Business Bankruptcy FAQs — What Businesses and Small Business Owners in Las Vegas Need to Know
Running a business isn’t easy, and when debt becomes unmanageable, the stress can feel overwhelming. Many small business owners hesitate to call a lawyer because they don’t even know where to start. This page answers some of the most common questions our clients ask when they first consider business bankruptcy.
At Larson & Zirzow, our Las Vegas business bankruptcy lawyers believe clear answers help you make confident decisions, whether you need to save your business or make sure you’re closing the doors the right way.
What is the difference between Chapter 7, Chapter 11, and Subchapter V for businesses?
Chapter 7 is a liquidation. If you file Chapter 7 for your business, the company stops operating, and a trustee sells off remaining assets to pay creditors. There’s no discharge for the company itself; it simply ceases to exist once the case is closed.
Chapter 11 and Subchapter V, on the other hand, are reorganizations. Your business stays open while you negotiate new payment terms with creditors and create a plan to pay debts over time. If your business is fundamentally viable but needs relief from overwhelming debt, Chapter 11 (or its streamlined version, Subchapter V) might be the better fit.
What is Subchapter V, and why is it important?
Subchapter V is a special version of Chapter 11 just for small businesses with debts under a certain limit (around $3.4 million currently, but this amount is subject to adjustment). It streamlines the traditional Chapter 11 process by removing costly formalities like creditors’ committees and speeding up the time from filing to plan confirmation. This makes reorganization realistic and affordable for smaller companies that couldn’t otherwise survive the costs of a full-blown Chapter 11.
Subchapter V is a game changer for many small businesses, and Larson & Zirzow has extensive experience helping small businesses and owners use the powerful tools of Subchapter V effectively.
Can a business owner be personally liable for business debts?
Often, yes. Most small business owners sign personal guarantees for leases, loans, or lines of credit for their business. If the business can’t pay, creditors can come after the owner’s personal assets, like their home, wages, or bank accounts.
If you’re personally liable on business debt, you may need to file a personal bankruptcy (like a Chapter 7, Chapter 13, or even a Subchapter V) alongside or instead of the business bankruptcy. Larson & Zirzow helps you look at the big picture so you don’t get blindsided by unexpected personal liability.
Can I keep running my business during bankruptcy?
In Chapter 11 and Subchapter V, yes — that’s the point! These reorganizations are designed to help you keep the doors open while you restructure debt and get back on stable footing. Although the bankruptcy trustee is involved and plays a supervisory role, you remain in control of operations as a “debtor in possession.”
In Chapter 7, the business does not continue. Once you file, the trustee takes over and winds everything down.
What happens to my employees if my business files for bankruptcy?
If you file Chapter 11 or Subchapter V, you usually keep operating, so you can continue paying your employees with court approval. Our attorneys do what’s needed to get that approval as quickly as possible after a business bankruptcy is filed, so you don’t need to worry about missing payroll. Sometimes the plan includes adjustments like reducing staff or renegotiating payroll expenses, but the goal is to protect jobs while putting the company on firmer ground.
If you file Chapter 7, employees are laid off when operations stop. Certain unpaid wages and benefits have priority status in the bankruptcy, so your employees may get paid ahead of other creditors when assets are sold.
Can I use bankruptcy to break a lease or contract?
Yes. In Chapter 11 or Subchapter V, you can reject leases or contracts that no longer make sense for your business, like an expensive commercial lease you can’t afford, or a vendor contract that eats up your cash flow. This flexibility helps you lower operating costs and reorganize on realistic terms.
In Chapter 7, the trustee takes over and winds down the business, terminating leases and contracts in the process.
What is the Automatic Stay, and how does it protect my business?
The Automatic Stay is one of the biggest benefits of filing for bankruptcy. The moment you file, creditors must stop:
- Prosecuting pending lawsuits or filing new ones
- Proceeding with foreclosures or repossessions
- Harassing you with collection calls, notices, and emails
- Garnishing wages and withdrawing from Bank accounts
The stay gives you breathing room to negotiate with creditors and develop your plan without the threat of immediate asset seizure.
Can Subchapter V help if I need to shut down?
Yes. While Subchapter V is designed for reorganization, it can also be used for an orderly wind-down when keeping the business alive isn’t realistic.
Unlike Chapter 7, where a trustee takes control and liquidates everything, Subchapter V can give you time to close out projects, sell assets for maximum value, help customers transition, and maximize payment to creditors under a liquidating plan. This approach often yields better results for everyone involved and helps protect your reputation in the community.
What debts can I discharge in business bankruptcy?
A business itself doesn’t get a discharge in Chapter 7; the entity just ceases to exist. However, in Chapter 11 or Subchapter V, the business can discharge most unsecured debts after fulfilling its plan obligations.
For business owners, to discharge personal guarantees or liability on business debt you may need to file a personal bankruptcy. Larson & Zirzow reviews your full debt picture and helps you choose the smartest path to minimize your personal exposure.
How long does a business bankruptcy take?
It depends on the type of bankruptcy and your unique situation:
- Chapter 7: A straightforward liquidation for a small business can usually wrap up in a few months.
- Chapter 11: A traditional Chapter 11 can last a year or significantly longer, depending on the size and complexity of the case, and whether creditors cooperate or not.
- Subchapter V: Most Subchapter V cases resolve with a confirmed plan within about six months because of streamlined deadlines and fewer procedural hurdles. But the case itself remains open until payments under a three to five year are completed, or the requirements of a liquidating plan are satisfied.
Is bankruptcy my only option?
Not necessarily. Sometimes we help clients negotiate workouts or other solutions outside of court. Other times, selling the business as a going concern or dissolving without bankruptcy may be a better choice.
At Larson & Zirzow, we’re known for giving honest advice in your best interests. We don’t push you into bankruptcy if other options make better sense.
Why choose Larson & Zirzow for my business bankruptcy?
Business bankruptcy is too complex and too personal for one-size-fits-all solutions. Larson & Zirzow is a boutique firm that doesn’t take cases by the truckload. Instead, we take the time to understand your business, your goals, and your personal situation.
Our experienced legal team includes a Board-Certified Business Bankruptcy Specialist, a prestigious credential that shows a commitment to top-level bankruptcy practice.
We guide you through every option — from Chapter 7 to Chapter 11 to Subchapter V — so you can make confident, informed decisions about your company’s future and your own peace of mind.
Talk to Us and Get Straight Answers Today
If you’re losing sleep over business debt, don’t wait until creditors force your hand. The sooner you get experienced advice, the more options you have to protect your company, your assets, and your family.
Contact Larson & Zirzow today for a confidential consultation. We’re ready to help you get clarity and take back control, whether that means saving your business or closing the doors on your own terms.