Bankruptcy Bites: Navigating the Fallout and Protecting Your Business When a Restaurant Goes Under

Possible measures and precautions when a restaurant goes bankrupt

Q&A

Q1: I run a restaurant, but due to recent poor management, I am considering bankruptcy. How should I proceed?

A1: Bankruptcies in restaurants have some unique problems compared to other industries. First of all, it is important to check your business status and consult a specialist lawyer. A lawyer will organize your company’s assets and debts and recommend the most suitable bankruptcy procedure. In addition, issues of employees and rental contracts are also involved, so you need to proceed carefully with a lawyer. Below, we will explain the specific steps and precautions in detail.

Characteristics of restaurant company bankruptcy

The food and beverage industry is one of the industries that has been particularly affected by the coronavirus pandemic. In 2020, there were many restaurants that managed to continue operating with the help of “zero-zero loans” and cooperative funds, but the lingering effects have made it difficult to raise funds, and more and more business owners are considering bankruptcy.

The following are issues specific to restaurants:

The complexity of restitution obligations: If the store’s interior and equipment (refrigerators, freezers, etc.) remain, it is often necessary to restore the store to its original condition at the end of the rental contract, and in some cases it may be difficult to vacate the store.
Diverse employment types: Many employees have a variety of employment types, including part-time employees, and problems with unpaid wages are likely to occur.

Flow of restaurant company bankruptcy

Consultation with a lawyer
First of all, we recommend that you consult with a specialist like Nagase Sogo Law Office. We will review your company’s financial situation and total debt to determine whether bankruptcy is the best choice. During your first consultation, we will decide on your future policy based on financial documents such as financial statements and passbooks.
Bankruptcy preparation and filing
After consulting with a lawyer, we will begin preparing the necessary documents and costs if you decide to proceed with bankruptcy proceedings. After the date of business closure is determined, the lawyer will send a notice of acceptance to the creditors and apply for personal bankruptcy to the court. Once the court formally accepts the bankruptcy proceedings, a bankruptcy trustee is appointed who will liquidate any remaining company assets and distribute them to creditors.
Completion of bankruptcy proceedings
Bankruptcy procedures are usually completed in about a year, with several rounds of communication with the court and bankruptcy trustee. Since a lawyer will represent you in all procedures, you can basically leave the dealings with the court and creditors to the lawyer.

Lease contract issues

When a restaurant company goes bankrupt, one of the important issues is the cancellation of the lease contract. If the interior of your store is unique, if you can quickly find a new tenant, you can let them use the space as is without leaving the space, which will greatly reduce the burden of restoring it to its original condition. Consider finding a tenant yourself or consulting with a management company.

Unpaid wages problem and countermeasures

Unpaid wages of employees is often a problem in restaurant bankruptcies. You need to be especially careful if you have many part-time workers who work in shifts. If you use the unpaid wages replacement payment system, up to 80% of your unpaid wages may be compensated. It is important to utilize this system and respond smoothly to employees.

Advantages of consulting with a lawyer who specializes in restaurant bankruptcy cases

Bankruptcy proceedings for restaurants involve many unique issues. Therefore, you can receive more appropriate advice by consulting a lawyer with extensive experience in restaurant bankruptcy cases. For example, they will tell you specific measures based on their experience, such as how to cancel a lease contract, how to treat employees, and how to negotiate with creditors.

Advantages of consulting a lawyer

receive professional advice: Bankruptcy procedures are complex, and it is important to understand the issues specific to restaurants before proceeding. Consulting with a lawyer will help you determine the appropriate legal course of action.
We can handle negotiations with creditors on your behalf.: Your mental burden will be reduced because your lawyer will communicate with your creditors on your behalf.
Fast and reliable procedure: By receiving support from experts, you can proceed with the procedure quickly and the bankruptcy procedure will proceed smoothly.

summary

There are many unique issues associated with restaurant bankruptcy, so it is best to consult with an experienced attorney. At Nagase Sogo Law Office, we provide support for all corporate bankruptcy procedures and aim for a smooth resolution. In order to fulfill your responsibilities as a business owner and make a fresh start, make the right decisions with the help of experts.

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