Free Enterprise - The FindLaw Small Business Law Blog

Chapter 11 Bankruptcy: What Small Businesses Need to Know

The dreaded b-word. No small business owner wants to think of their company going under, but in some cases it's inevitable.

But not all bankruptcies equal total failure. Chapter 11 bankruptcy can allow your business reorganize, remain open, and repay your debt. Here's a look.

1. Chapter 11 Bankruptcy Reorganization Process: an Overview

Chapter 11 allows businesses to reorganize, stay operational, and create a plan to repay debts to creditors. You'll need court approval and a comprehensive reorganization plan that will outline exactly how your business will deal with creditors, and your creditors may even have a say in reorganization.

2. Should Your Business File for Bankruptcy?

It's hard for entrepreneurs to admit failure, but it is a fact of business life. Knowing whether and when to file for bankruptcy is just as important as knowing how to structure that bankruptcy plan. Knowing you have the option under Chapter 11 to keeps your doors open may affect your decision making.

3. Business Bankruptcy: Which Type Is Best for You?

Now that you've decided to pull the bankruptcy trigger, there are still some important decisions to make. Chapter 7 means closing up shop for good, and Chapter 13 may not be available to all small businesses. So Chapter 11 may be your best, or only option.

4. Bankruptcy, Reorganization and Commercial Leases

If you're filing for Chapter 11, chances are you have more than one creditor, and it's likely that one of those creditors is your landlord. So how will reorganization affect your commercial lease?

5. Which Debts Can Be Discharged in a Business Bankruptcy?

Because Chapter 11 allows for reorganization and the continuation of your business, it may not discharge any of your debt entirely. Instead, you will likely repay debts according to the reorganization plan, typically by dividing your creditors into classes and prioritizing repayment.

If you have more questions about Chapter 11 specifically or bankruptcy in general, contact an experienced bankruptcy attorney near you.

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