Bankruptcy Basics and the Impacts of COVID-19

Short summary

U.S. bankruptcy law provides three main pathways: Chapter 7 liquidation, Chapter 11 business reorganization, and Chapter 13 personal repayment plans. The COVID-19 pandemic triggered numerous small-business bankruptcies due to supply-chain disruptions and cost pressures that subcontractors couldn't pass to clients. Courts have discretionary power to convert cases between chapters and approve/reject reorganization plans based on good-faith analysis.

• •Chapter 7 (liquidation), Chapter 11 (business reorganization), and Chapter 13 (individual repayment) are the three bankruptcy pathways in U.S. law
• •COVID-19 caused supply-chain price spikes and market shifts that forced many small contractors into bankruptcy filings
• •Bankruptcy courts can convert cases between chapters and reject reorganization plans if debtors lack good faith

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