If you own a small business and you want to file for bankruptcy, you generally choose to file Chapter 7 bankruptcy or Chapter 13 bankruptcy, depending on your individual situation. However, there is another type of bankruptcy that you can file for. Chapter 11 bankruptcy is an option for small businesses that want to restructure their business and continue operation while doing so. Chapter 11 bankruptcy is an option that you should consider if your business is owned by a limited liability company, a corporation, or a partnership. Understanding all of your options when filing for bankruptcy could help you to make the best decision for you and your business.
If you don’t meet the eligibility requirements needed in order to file for Chapter 13 bankruptcy, you can still reorganize your business through Chapter 11 bankruptcy. This type of bankruptcy is part of the United States Bankruptcy code. Major corporations or small businesses can apply for Chapter 11 bankruptcy. Chapter 11 bankruptcy allows a debtor to restructure finances through a reorganization plan. This reorganization plan has to be approved by the bankruptcy court before it can be put into place. Chapter 11 bankruptcy works by reducing obligations and changing payment plans in order to help a debtor balance expenses and income. This allows the debtor to retain profits and continue to run the business. Businesses can also downsize under Chapter 11 bankruptcy by selling some assets or paying down claims that the business owes.
In order to be eligible for Chapter 11 bankruptcy, you have to be a small business debtor. A person or an entity is considered a small business debtor if they owe less than $2,490.925 in claims, and if they are engaged in commercial or business activities. If you meet these eligibility requirements, you can file for Chapter 11 bankruptcy.
Chapter 11 bankruptcy is not a common form of bankruptcy because it can be risky, complex, and expensive. However, filing for Chapter 11 bankruptcy can pay off in the right situation. If you are considering filing for Chapter 11 bankruptcy, you should get legal advice before doing so. A bankruptcy lawyer such as myself can help you determine if Chapter 11 bankruptcy is the right decision for you and your business. You can contact me for a free consultation by visiting my website.