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Can a small business use Chapter 11 bankruptcy?

On Behalf of | Mar 29, 2022 | Chapter 11 |

When you think of a business that is restructuring for a better financial outcome, do you imagine a large corporation? Maybe you think about a business with 500 employees or a massive factory that produces many of the products people use today.

While Chapter 11 bankruptcy can be used by these larger companies, it can be just as beneficial for a small business like yours. Chapter 11 bankruptcy gives you an opportunity to reorganize your small business and to make sure your operating costs get back under control. If you successfully complete the plan, then your business can emerge with fewer costs and a better chance of becoming profitable as it moves forward.

The benefits of using a Chapter 11 bankruptcy

With a Chapter 11 bankruptcy, you get some time to breathe. As soon as the bankruptcy is filed, creditors have to stop calling you. The automatic stay goes into place and stops creditors from filing lawsuits against you. It also makes sure that banks can’t close or seize your accounts and that your property can’t be foreclosed upon.

Why is the Chapter 11 stay so amazing? It gives you a much-needed moment to think about what you want to do and to take time to catch up with debts. After you reorganize your business, you can successfully emerge with a leaner structure and one that helps your business become profitable again.

Chapter 11 bankruptcy isn’t the best choice for everyone

While a Chapter 11 bankruptcy could be a good choice for you if you have debts to resolve, it may not always be the right one. If you’re considering shutting your doors or selling your business, you might want to look into a Chapter 7 bankruptcy instead. This liquidates many of your assets and could help you walk away from the debts associated with your business, so you can go on to other ventures without your current business holding you back.

The right option for you could be one of these. Take some time to get to know the laws that may impact your business, how bankruptcy works and to decide how you want to move ahead with your business.