Sometimes things just go wrong. In the business world, especially, failure doesn’t always have a direct cause, and it’s for that reason that bankruptcy exists.
While it’s true that some bankrupt companies decide to fold their hand, not all businesses that go through bankruptcy will have to close their doors. In fact, many businesses that go through Chapter 11 bankruptcy choose to do so specifically because they plan to keep things running.
Here’s what you should know about Chapter 11 bankruptcy:
The Purpose of Chapter 11 Bankruptcy
When businesses run into financial trouble, they will often seek help from the courts through Chapter 11 Bankruptcy. This type of bankruptcy allows debtors to restructure their finances so that they can regain a profitable standing while continuing to operate. Businesses that have filed for Chapter 11 bankruptcy also have the option to sell off some of their assets to pay off some of the debt they owe.
Why File for Chapter 11 Bankruptcy
If you own your small business as part of a partnership, corporation, or LLC, then Chapter 11 is your only option if you want to file for bankruptcy.
While both major corporations and small businesses both use Chapter 11 to restructure debt to stay in business, there are a few special provisions that small businesses can take advantage of to help expedite the process (and save some money).
According to the Bankruptcy Code, a small business debtor is a business entity that owes no more than $2,566,050.* Small business Chapter 11 cases may not be required to have a creditors’ committee and may also be exempt from submitting a disclosure statement. To put it shortly, not being compelled to have these two responsibilities can save a debtor a lot of money.
How to Start the Chapter 11 Process
It is usually the debtor who initiates the Chapter 11 bankruptcy process when they file a petition in court. Businesses can decide whether to file where they conduct business or in the place where they are incorporated.
Bankruptcy is a complicated process. If you are a small business owner and think Chapter 11 bankruptcy could help you get your business finances in order, talk to a qualified bankruptcy attorney to learn more about what the next steps entail.
Now that you know your small business should never file bankruptcy on its own, call the bankruptcy attorneys at AM Law in Miami. Our attorney partner Gary M. Murphree, Esq. has extensive experience handling Chapter 11 bankruptcy cases. His experience as a CPA also gives him unique insight into the bankruptcy and business restructuring processes.
The future of your business depends on the careful handling of your Chapter 11 bankruptcy case. Call today to set up a consultation.
*This number is accurate as of April 2016. It is important to understand that laws can change often. Be sure to consult a professional who has access to the latest information regarding bankruptcy procedures.