Paying Down Credit Card Debt vs.. ? Filing for Bankrupcty

[Rowan Gratz]

Asking for a friend...

My Friend owns a restaurant business that was severely affected by Covid 19. During the pandemic he was able to get refundable PPP loans to help offset the 50% drop in Gross Receipts that affected his business. He kept on as many employees as possible and switched to take out etc. In 2022 he ran through the bulk of his stimulus and simultaneously one of the biggest employers in the region closed up and relocated to a new area. Faced with declining revenues and a struggling local economy he tried to keep his once profitable business open using his last available funding source. Business Credit cards and a SBA EIDL loan. 

Over the 2023 calendar year he used up his line of credit and most of his SBA loan.. still business never rebounded to pre pandemic levels and his P/L is negative. 

To add to his woes, his Landlord has indicated that he will not renew the lease that he held for the previous 10 years. 

Forced to relocate or sell he tries to sell his business to pay off his debts. However in the context of the sluggish economy with many businesses already for sale. No buyers are willing to accept his proposal at market value. 

Running out of time on his lease he is forced into liquidation. On the hook for SBA debt and Business lines of credit. He sells some of his equipment at firesale prices but doesn't recoup much from his auction. 

What does he do next ? His restaurant is held in an S-Corp with negative equity,his only remaining capital is in a few pieces of valuable real estate acquired over the last few years. How does he protect his capital even as his small business goes under ?

Any constructive ideas appreciated.