How Chapter 11 can help a business

On Behalf of | Jul 6, 2022 | Chapter 11 |

If you own a struggling business, you want to consider all your options to get back on track and possibly return to profitability. One option is Chapter 11 bankruptcy.

Chapter 11 protects your business from creditors while allowing you to reorganize and continue to run the business while working out a reorganization plan. There are many potential benefits of Chapter 11 bankruptcy.

The benefits of Chapter 11 bankruptcy

Some advantages of Chapter 11 bankruptcy include:

  • Creditors must stop collection efforts immediately once the business files for bankruptcy.
  • The business can continue to operate under its current management and ownership.
  • The business owner becomes a debtor-in-possession and may be able to borrow money on better terms at that point.
  • The business can renegotiate leases and contracts and may be able to negotiate out of them or negotiate better terms.
  • The business may be able to sell assets that were previously encumbered to raise money.
  • At the end of the bankruptcy process, the intent is for the business to emerge in financially healthy shape and be able to continue.

Reorganization

The basic process of the Chapter 11 bankruptcy allows you to develop a reorganization plan to reorganize debts and continue operating. For businesses that are struggling but do not wish to close their doors, a reorganization bankruptcy may be a process to consider.

Chapter 7 liquidation bankruptcy is another option that allows the business to liquidate assets to repay creditors. Either type of bankruptcy has its advantages and disadvantages. An attorney with experience in debt relief can help business owners evaluate their options.