Why Chapter 11 Can Be A Better Option For A Small Business

If you are the sole proprietor of a business, you are allowed to file for bankruptcy in the same way that you would file as a consumer with credit card debt or medical bills. You may choose to file for Chapter 7 or Chapter 13 bankruptcy. However, you have the additional option of filing for Chapter 11, which takes into account both your personal assets and your business assets.

Filing for Bankruptcy Is a Responsible Decision

When you form a business, you will want it to succeed and will not want to see it struggle. However, your business might encounter events that are beyond your control, such as a lockdown, and you will be able to minimize the impact that this has on your employees, your customers, and yourself by filing for Chapter 11 bankruptcy. 

When your business bankruptcy attorney helps you file for Chapter 11 bankruptcy, you will be able to continue to operate and can work toward eliminating some of your debts. You will be able to reduce your business obligations and develop payment terms that are more favorable to you with the help of the courts. 

Chapter 11 Vs. Chapter 13

One of the main differences with Chapter 11 is that there is no limit to how much you may owe to your creditors. Therefore, you will want to discuss with a business bankruptcy attorney about whether filing for Chapter 11 bankruptcy is the right option for you.

When filing for bankruptcy, you will need to provide financial information about your business and the creditors to whom you owe money. Your petition for Chapter 11 bankruptcy will also need to include a reorganization plan. For example, with each claim, there will need to be an explanation of how all of these claims will be handled. 

The Hearing

Each creditor will be allowed to participate in a hearing. Each creditor will be allowed to vote on the plan and the courts will need to confirm the plan. One strength of Chapter 11 is that your assets do not end up in the possession of a trustee. Instead, you will be the "debtor in possession" and will be in charge of the reorganization process. 

As a debtor in possession, you will be required to account for all property, examine claims, file your objections, and file tax returns. However, you can always hire a business bankruptcy lawyer to assist you in this process.