What makes Chapter 11 bankruptcy beneficial for business owners?

On Behalf of | Jul 7, 2021 | Bankruptcy |

When people think of bankruptcy, Chapter 7 proceedings are often what they imagine. They think about people asking the court to discharge their debts because they can’t pay them back.

However, liquidation bankruptcy is only one kind of proceeding. There are multiple other forms of bankruptcy also available to individuals and businesses. Chapter 11 bankruptcy is less common than Chapter 7 or Chapter 13, but it can be incredibly beneficial.

Especially for business owners trying to keep their company operational, Chapter 11 bankruptcy could be the best form of bankruptcy available.

Chapter 11 bankruptcy lets you keep most of your assets

Both Chapter 7 bankruptcy and Chapter 13 bankruptcy have strict limitations about income. Chapter 7 bankruptcy can also force an individual or a business to liquidate or sell off property to repay creditors. Chapter 11 bankruptcy can sometimes involve the sale of some assets to repay creditors, but many businesses can use this process to reduce or streamline their operations.

If you want to keep your business operational, getting rid of your business assets is not the best approach to managing your company’s current debt. Restructuring debt to extend the repayment period or reduce your payments be a much better option.

Chapter 11 bankruptcy can help you regain control over your budget

When you’re operating costs and business liabilities exceed the revenue, even for a short amount of time, your company could be in real danger. It is one thing to fall behind on revolving lines of credit, which could complicate future purchases, and it is entirely another matter to be unable to pay staffing costs, rent or a mortgage.

When you don’t have enough capital to pay all of the company’s expenses every month, you need to quickly regain control or face the imminent failure of your business. By renegotiating and restructuring your company’s biggest, you may be able to correct the financial situation and ensure payment of those other, crucial business expenses. You can also benefit from the oversight of the courts regarding major company decisions during the bankruptcy process.

Starting the process requires filing paperwork with the courts and submitting an initial plan to restructure the company and make a good-faith attempt to repay business debts. Learning more about Chapter 11 bankruptcy can help struggling business owners decide what form would be best for their situation.