Michael A. Appel 
How does a restaurant react when it shuts down?
The business of running a restaurant is similar to taking on the position of the Captain of the vessel. You must be concerned not just about the health of the vessel as well as the oceans. In the last two years the COVID-19 pandemic has caused the most volatile seas in many years. Between complete closures, partial openings returning to full closures and after that, literally no one knows what’s next, many restaurateurs have thrown their boats in the sand and others will follow in the coming weeks and months to come.
The goal is to always support the local food industry to the best of our abilities particularly small mom-and-pop food businesses – despite the best of intentions, at times the pressure of maintaining the restaurant’s operations is too to bear. Nearly 100,000 restaurants have been shut across the United States since the start of the epidemic, which is 15 percent of all restaurants – an amount that is shaking the whole food industry.
What happens if an establishment closes? Michele Finizio, a New Jersey lawyer, explains the options available to a restaurant should it decide to declare and file online Bankruptcy. “Assuming that the establishment is operating legally, its owners may decide to file bankruptcy. If they decide to do so there are three choices three options: Chapter 7, Chapter 11, or Chapter 13 bankruptcy. Each of them has advantages for the parties that files.
Chapter 7 bankruptcy
If you file for Chapter 7 bankruptcy, the restaurant will close, while the bankruptcy court of the jurisdiction in question (there are more than 100 bankruptcy courts in the United States) determines which of the creditors will receive what. There’s never enough to satisfy everyone, so the task of the bankruptcy court is to assign priority to creditors and assets. The first ones paid are often the only ones to be paid, and usually not fully.
Chapter 11 bankruptcy
The other option is Chapter 11 bankruptcy. This is a kind of bankruptcies that are sought-after by restaurants that have a road to success in the near future, but they need time to regroup the business. The company is permitted to continue and the debts are reorganized , and often consolidated into a plan which is then presented for approval by the judge. The restaurant is permitted to remain in operation for as long as the court approves of the plan, even if it doesn’t result in the complete repayment of obligations. In most cases, the restaurant will have to sell certain assets in order in order be able to pay off its debts. This is why Chapter 11 may not be the best option for a family-oriented food business.
Chapter 13 bankruptcy
For an eventual Chapter 13 bankruptcy, the restaurant will work with its creditors in renegotiating the terms of payments. This is the route taken by many restaurants after the outbreak. This is an ideal option for a food company which was profitable prior to the outbreak but has gone through several difficult periods from mid-2020 (perhaps with a few pauses as well as a return to regular activity) however, now has the possibility of returning to the way it were.
Whatever legal path the restaurant decides to go the most significant issue for us all is that the majority of the restaurants that shut down simply will not be able open again. This is detrimental to the overall economy however, it affects our local communities more directly. Small food companies not only aid the families who run their businesses – when viewed collectively as a whole, they also are an important employer group across the nation.
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