Your small business is your pride and joy, and you’ve always hoped that it would be something you could pass on to your kids. Unfortunately, difficult financial times have affected you and made it hard to pay your contractors, employees and others.
Chapter 11 bankruptcy is one option that you may want to consider while looking into how to keep your business running. Chapter 11 bankruptcy allows you to pay back unsecured debts in partial amounts, and the benefit of the automatic stay is that creditors will no longer contact you or harass you at home.
How does a Chapter 11 bankruptcy work?
A Chapter 11 bankruptcy starts with a petition. Either you or your creditors can seek this petition. Once it’s filed with the U.S. Bankruptcy Court, then an automatic stay goes into place. This stay means that the creditors may no longer start new collection efforts or continue collections efforts for past debts.
The goal of the stay is to give the debtor time to create a reorganization plan. They will be able to negotiate repayment terms that they can meet, but they have the benefit of not having to worry about debt obligations at that moment.
Chapter 11 bankruptcy is special because it does not have the goal of liquidating assets or selling the business. Instead, the goal is to make the business profitable. To do this, you and your attorney will need to negotiate contracts and leases to work out a plan that keeps your business in the green.
Our website has more on Chapter 11 bankruptcy and why it’s such a positive type of bankruptcy to consider if your business is in trouble.