By Robert A. Stiberman, Esq., Member of The Florida Bar since 1998, representing Florida bankruptcy clients since 2009. Last reviewed: September 2026.
Florida restaurants operate on thin margins, and when debt piles up, from a bad lease, stacked Merchant Cash Advances, unpaid sales tax, or a slow season, closing can feel inevitable. It usually isn’t. Chapter 11, and its small-business version, Subchapter V, lets a restaurant stop collection, shed the leases and contracts dragging it down, restructure its debt, and keep the doors open. The single most powerful tool in a restaurant case is the right to assume or reject a lease under Section 365. Here is how it works and how the pieces fit together.
Why Restaurants End Up in Chapter 11
The pattern is familiar: a location that no longer justifies its rent, high-interest Merchant Cash Advances taken to survive a downturn, sales and payroll taxes that fell behind, equipment financing, and vendor balances, all colliding at once. Individually, any of these is survivable. Together, they choke off the cash a restaurant needs to operate. Reorganization exists precisely to untangle that knot while the restaurant keeps serving customers.
The Lease Is Usually the Biggest Issue: Section 365
For most restaurants, the commercial lease is the make-or-break contract, and 11 U.S.C. § 365 gives a Chapter 11 debtor real power over it. You generally have three choices:
Reject a lease you can’t afford. If a location is underwater, paying far more in rent than it can ever earn, you can reject the lease and walk away. Rejection counts as a breach, but the landlord’s damages claim is capped under 11 U.S.C. § 502(b)(6) (broadly, the greater of one year’s rent or 15% of the remaining term, not to exceed three years), and that claim is treated as a general unsecured claim, paid pennies on the dollar under a plan. Rejecting a single bad lease can turn an unprofitable restaurant into a viable one.
Assume a lease that works. If a location is a keeper, you can assume the lease and stay, but to do so you generally must cure the arrears (or provide adequate assurance you will) and show adequate assurance of future performance. The plan can spread the cure amount over time.
Assume and assign, even over an anti-assignment clause. Under § 365(f), a favorable lease can often be assumed and assigned to a buyer even if the lease says it can’t be transferred, which is how a struggling owner can sell a well-located restaurant as a going concern and pay creditors from the proceeds.
The 210-Day Clock, and Why Timing Matters
Restaurants do not have unlimited time to decide. Under § 365(d)(4), a debtor must assume or reject a nonresidential lease within 120 days of filing, extendable once by 90 days for cause, so 210 days maximum without the landlord’s consent. In the meantime, you must keep paying rent that comes due after filing. Two timing points are critical: you have to move deliberately within that window, and, just as important, you should file before the lease is terminated. If a landlord has already completed an eviction and the lease is dead under Florida law before you file, bankruptcy generally cannot resurrect it. When an eviction is looming, days matter.
Stopping Merchant Cash Advance Sweeps
Restaurants are among the most heavily targeted businesses for Merchant Cash Advances, and post-pandemic many are servicing several at once, with daily ACH withdrawals draining every day’s receipts. Filing triggers the automatic stay, which stops those daily sweeps and any frozen-account leverage immediately, and a plan can push the MCA claims into the general unsecured class. We cover this in depth in our guide to stopping MCA sweeps in Florida.
Sales Tax, Payroll Tax, and Your Liquor License
Restaurants collect sales tax and withhold payroll tax, and those are “trust fund” taxes, money held for the government that generally cannot be discharged and that can become the owner’s personal liability. Chapter 11 can stop tax collection and pay priority taxes over up to five years, but it will not erase them; see our guide to Florida sales and payroll tax debt in business bankruptcy. Tax status also matters for a liquor license: a Florida license (especially a quota license) can be a valuable estate asset that may be sold or transferred as part of a reorganization, but transfers are subject to state approval and typically require tax clearance, so unpaid sales tax has to be addressed as part of the plan.
Equipment Leases and Financing
Kitchen equipment, POS systems, and refrigeration are often leased or financed. Those agreements can also be assumed or rejected under § 365, and genuinely secured equipment loans can sometimes be restructured, keeping the equipment you need and shedding what you don’t.
Subchapter V Is Usually the Right Tool
For most independent restaurants, Subchapter V is the ideal path: it is faster and cheaper than traditional Chapter 11, the owner stays in control, and a plan can be confirmed even over creditor objection (“cramdown”) if it commits the restaurant’s projected disposable income for three to five years and is fair. That combination, keeping the lease and license you want, shedding the ones you don’t, stopping MCA sweeps, and restructuring tax and vendor debt, is exactly what a distressed restaurant needs.
A Real Result
Neighborhood restaurant, confirmed over creditor objection (South Florida). A take-out and delivery restaurant, about a decade in business, took on high-interest MCA loans after COVID-era losses; an MCA creditor froze its merchant accounts, and it carried roughly $810,000 in debt. We filed Subchapter V, stabilized operations, and, when agreement with creditors couldn’t be reached, pursued confirmation under Subchapter V’s non-consensual “cramdown” provisions. The court confirmed the plan over creditor objection, and the restaurant stayed open. Past results do not guarantee a similar outcome; this example is anonymized and reflects the specific facts of that matter.
How We Help Florida Restaurants
Robert A. Stiberman has practiced Florida bankruptcy since 2009 and is admitted in all three of Florida’s federal districts. We move quickly, especially when an eviction or a frozen account is imminent, to trigger the automatic stay, evaluate every lease and contract, protect the liquor license, and build a Subchapter V plan the restaurant can actually sustain. Outcomes depend on the specific facts and are never guaranteed.
Frequently Asked Questions
Can Chapter 11 get my restaurant out of a bad lease?
Yes. Under Section 365 you can reject a lease you can’t afford and walk away; the landlord’s damages are capped and treated as a general unsecured claim. You can also assume and keep a good lease, or assume and assign it to a buyer.
Will filing stop my landlord from evicting me?
The automatic stay stops a pending eviction the moment you file, but timing is critical: if the lease was already fully terminated under Florida law before you filed, bankruptcy generally cannot revive it. File before it’s too late.
What happens to my liquor license?
A Florida liquor license can be a valuable estate asset that may be sold or transferred in a reorganization, subject to state approval and, usually, tax clearance. We address it as part of the plan.
Can bankruptcy stop the daily MCA withdrawals draining my register?
Yes. The automatic stay stops MCA sweeps and account freezes immediately, and a plan can reclassify or challenge the MCA claims.
Do I get to keep running the restaurant?
In Subchapter V, yes, you remain in control and keep operating while you reorganize.
Talk to a Florida Restaurant Bankruptcy Attorney
If your restaurant is facing eviction, an MCA freeze, or tax collection, do not wait. Call 954-922-2283 or request a free, confidential consultation. We offer same-day assessments for urgent matters and can move fast to protect your lease, your license, and your business.
This article is general information, not legal advice. The treatment of a lease, license, tax, or MCA claim depends on the specific facts of your case; past results do not guarantee a similar outcome.