Chapter 11 bankruptcy allows a business to renegotiate debt

On Behalf of | May 15, 2020 | Chapter 11 and Chapter 7 business bankruptcies |

Business and economic circumstances can change in a heartbeat, leaving a once-profitable business struggling to get by and pay for rent and workers. If your business has recently experienced a significant downturn in income, you may not be able to make all of the necessary payments on the debt your company carries.

When that happens, it’s only a matter of time before delinquent payments provoke your creditors into attempting to collect on the debt. Whether you face creditor lawsuits, worry about a cut-off on critical supplies or face the repossession of machinery and equipment you need to continue operating, getting a handle on your debt can potentially allow your business to survive a difficult time. That’s why Chapter 11 bankruptcy can be a beneficial option for businesses struggling with debt that hope to remain open.

Chapter 11 proceedings typically involve a repayment plan

In Chapter 11 bankruptcy, companies request that the courts grant them an automatic stay on debt collection activity while they attempt to renegotiate that with their creditors, potentially in the hopes of retaining collateral necessary to do business.

You may be able to request special accommodations, like having missed payments moved to the end of the loan instead of due immediately. In some cases, lower monthly payments or a better interest rate could also be part of the agreement that you reach with your lender.

Provided that you comply with the repayment plan, it may be possible for your business to come out of Chapter 11 bankruptcy more financially secure and solvent than it was prior to your difficult period.