VIRGINIA BEACH, Va. -- The COVID-19 pandemic has not only struck small businesses’ bottom lines with dwindling revenue and clients - it's also hit them with an ongoing obligation to meet bills and debts on time.
Local commercial bankruptcy attorney Kelly Barnhart of Roussos and Barnhart PLC told News 3 she predicts there will be an increase in commercial bankruptcy filings. She added her office has already received calls inquiring about it.
"Understandably, these business owners are in somewhat of a panic situation,” Barnhart explained, “because they see that their income has decreased significantly but their expenses are staying the same."
Bankruptcy is federal law and Barnhart explain two kinds of bankruptcy chapters: A Chapter 7, which calls for the shutdown of a business, and Chapter 11, which helps create a plan for those struggling to keep up with debts.
A commercial bankruptcy attorney will ask the business for certain information and documents in preparation of a consultation. The attorney will also explain some options the business owner can consider.
The case will go to bankruptcy court, which is under federal court, and a federal judge hears the case. Once the businesses is officially in bankruptcy, creditors are not allowed to constantly contact you or threaten to sue.
"Everybody understands that needing to file a bankruptcy isn't as a result of doing anything wrong or mismanaging a business,” Barnhart said. “It's due to circumstances outside their control."
Jimmy Jackson, the owner of Direct Foods in Virginia Beach, went through the commercial bankruptcy process in 2017.
"I took on investors; I could never take a paycheck because I was giving all the money away to the investors,” Jackson said. "Once I paid back the investors, it was like there was nothing pretty much left."
He reached out to Barnhart in 2017 when the financial troubles became overwhelming. Before then, bankruptcy was something he did not think positively of.
"I thought it was a disgrace to file for bankruptcy and she said, ‘No' - she comforted me,” Jackson said. “It's nothing like that."
Direct Foods is still in business at its Jensen Drive location. He also said the company started doing better after the bankruptcy and is financially stable.
Jackson said he felt a burden get removed from his shoulders, the same feeling Barnhart said her clients also felt.
"Small business, we drive America,” Jackson said, suggesting bankruptcy as an option for other financially struggling businesses. “We do a lot of that, so anybody that has a small business, just don't give up."