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Chapter 11 bankruptcy is reorganization over liquidation

On Behalf of | Oct 6, 2023 | Business Bankruptcy, Chapter 11 |

Florida business leaders make decisions every day that they think will benefit their companies in the long run. For some, an important decision is whether or not to take on a debt. But, what might look like a good decision for the future of the company at the time might end up becoming a seemingly insurmountable burden as time goes on.

Luckily, businesses that are facing high debt burdens might be able to avail themselves of the advantages of Chapter 11 bankruptcy.

Chapter 11 basics

Typically, to pursue Chapter 11 bankruptcy, there must be a path forward for your company. Under this form of bankruptcy filing, the debtor is afforded the opportunity to reorganize the company, paying debts back over time. This is different from Chapter 7 liquidation bankruptcy, in which assets are sold, debts paid and the company is typically dissolved.

In the beginning, a Chapter 11 bankruptcy filing is similar to other bankruptcy filings. Eligibility requirements must be met and assets and debts must be listed. The biggest difference is that a plan to re-work the company and pay off debts is crucial in a Chapter 11 bankruptcy filing.

The idea is that the company will be able to continue to operate, probably keep some employees and, in short, continue to attempt to generate a profit. This can be more appealing to creditors who see potential in a company’s ability to return to profitability.

All companies in Florida face challenges at some point in time. If debt burdens are one of your company’s challenges, be sure to weigh the pros and cons of Chapter 11 bankruptcy. If it is the right move for your company, it could be a huge step toward securing long-term viability.