Chapter 11 bankruptcy basics

| Feb 17, 2021 | Chapter 11 |

Chapter 11 bankruptcy can help struggling businesses that wish to remain in business. It is a reorganization bankruptcy option for businesses that are facing financial challenges to consider.

Eligibility for Chapter 11 bankruptcy

Both small and large businesses are eligible for Chapter 11 bankruptcy. In some situations, even individuals may have eligible for Chapter 11 bankruptcy based on the circumstances.

Either owners of the business or creditors of the business can file for Chapter 11 bankruptcy. If creditors file for the bankruptcy, it is referred to as an involuntary bankruptcy petition.

Benefits of Chapter 11 bankruptcy

There are several potential benefits that are part of the Chapter 11 bankruptcy including:

  • Avoidance of total liquidation of the business which allows the business to remain in business and continue to operate;
  • Provides time for the development of a reorganization plan and to file the plan;
  • Allows the business to reorganize aspects of the business that are not profitable such as reducing costs or seeking new sources of income or capital; and
  • Allows the business owner to retain control of their business.

Chapter 11 bankruptcy also allows the business the opportunity to potentially renegotiate leases and contracts. Whatever reorganization options and plans the business develops, the bankruptcy court must approve the reorganization plan.

Chapter 11 bankruptcy is a court-supervise business restructuring process. It allows the filing business the opportunity to reorganize with the goal of returning to profitability. Business bankruptcy is an option that can help a struggling business get back on its feet which is why struggling business owners should understand who is eligible for Chapter 11 bankruptcy and how it may be able to help them address their financial concerns.