If you are considering declaring bankruptcy for your business at this point, you are surely not taking such an extreme decision lightly. It is a far reaching, difficult and important decision to take, and you probably believe there is no other way. Nevertheless, you need to be informed by a trustworthy bankruptcy attorney before you make the final call. Are you certain you truly understand the bankruptcy code? Here we will tell you some basic information on Chapter 11 which you need to study carefully.
Chapter 11 is a chapter of the United States Bankruptcy Code which allows you to reorganize your business under the bankruptcy national laws. Every small business, as well as individuals, can use Chapter 11 bankruptcy, although its most prominent users are corporate entities.
Chapter 11 is meant to keep your business working, providing you some time to get back on your feet and establishes a payment schedule that will allow you to slowly repay the total amount of your debt. Normally, your business may be permitted to go on functioning as long as the Bankruptcy Court approves it. Why is that? Notice Chapter 11 empowers the trustee to operate your business. However, you as the debtor, as debtor in possession, may act as trustee of the business, unless of course, a separate trustee is appointed for cause. If you owe less than $2000 you should ask to be treated as a “small business”. This way, your case would get treated in a fast, different way than a regular Chapter 11 case.
Chapter 11 provides tools for debtors, as well as mechanisms to restructure your business. On the other hand, it may not be the right answer to your financial problems. Are you still wondering whether Chapter 11 is the right choice for you, as a small business debtor?
Keep in mind that filing Chapter 11 will not cancel your debts, since your company has to outline a proposed future plan, or restructure, including in it every current creditor. Part of the plan is establishing a payment schedule in order to repay all due amounts. At the same time, if your company is just going through a temporary setback, filing Chapter 11 is not the best solution.
A bankruptcy attorney will probably advise you to get in touch with your creditors and make a payment arrangement. Take into account that filing for bankruptcy will reflect on your credit report for years. Last but not least, consider the effects bankruptcy will have on your shareholders. Again, before making a decision you should talk to someone who knows bankruptcy law and that can help with your small business case.
Bankruptcy is a word that generates fear and discomfort. However, Chapter 11 may be exactly what you need in order to give your business a fresh start, and the opportunity to get back on its feet, renegotiate the debt, and even rectify any organizational or financial problems. A proper bankruptcy attorney may help you make the right decision. The future of your company lies in your hands!