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More California Traders Considering Bankruptcy as Pandemic Impacts Worsen

California Bankruptcies Rise as Businesses Feel the Pinch of the Pandemic

Amid the raging global pandemic, the US government has deployed aid to the most vulnerable states by injecting billions of dollars into their economies. The funding meant to combat the coronavirus pandemic comes at a time when cases of bankruptcy are on the rise.

The state of California, however, is not among the beneficiaries of the federal government aid. This is despite the rising bankruptcy cases under Chapter 11 California bankruptcy laws, as businesses struggle with economic hardships after the government forced companies to close to contain the virus spread.

Emergency grants and loans from financial institutions have been instrumental in sustaining the businesses so far. However, the strategy does not seem sustainable under the current conditions as many small businesses, including restaurants and independent retailers, continue to shut down.

The prospects of more and more companies seeking for Bankruptcy protection under California law is estimated to increase rapidly over the next few months. This would be unavoidable unless the government finds new strategies that would allow the small businesses and companies to continue their operations even as the battle against the pandemic is strengthened.

The government recently announced plans to have businesses including restaurants, which have been some of the hardest hit, resuming their operations soon. Many small scale firms and retailers owners, however, remain skeptical of the progress, seeing that the process seems to be taking longer than expected. This has left the businesses with little option but to seek financial aid from the government to remain afloat.

Even if the government succeeds in reopening the operations of the companies as it plans, doubts remain on their ability to resume normal activities given the toll that the pandemic has had on them. Retailers and small scale traders in California did not seem confident about the government’s directives that recommend them to have a 60 to 65% occupancy rate as a way of observing social distancing to resume operations. Thus anxiety remains high with most eying Chapter 11 bankruptcy to take advantage of the Small Businesses Reorganization Act.