There are several different types of bankruptcy available to struggling business entities. In some cases, those preparing to close an organization pursue Chapter 7 bankruptcy, which they can potentially complete in a few months.
Other times, the goal of bankruptcy is to restructure a company, address financial challenges and keep the company operational. Chapter 11 bankruptcy is a common option for business leaders hoping to keep their companies solvent in the long run. Typically, the Chapter 11 process is longer than the Chapter 7 bankruptcy process.
A Chapter 11 filing can be a multi-year process
The goal of Chapter 11 bankruptcy isn’t just the elimination of debts but rather the reorganization of the company to help it return to financial solvency. The Chapter 11 process is more complex, which means that the business leader pursuing bankruptcy will spend several months preparing to file.
They then need to work with the court-appointed trustee and representatives from their creditors to develop a reorganization plan. After confirmation of that plan, the organization then implements the plan.
Depending on the details of the plan and the debts the organization needs to address, carrying out the plan can last for anywhere from 18 months to five years. Small businesses can occasionally complete the entire process in under a year. However, it is common for Chapter 11 bankruptcy to require multiple years from beginning to end.
Business leaders who have support while preparing for Chapter 11 bankruptcy, establishing a reorganization plan and implementing that plan may be able to streamline the process. Reviewing organizational debts and revenue with a skilled legal team can be a good starting point for those hoping to restructure a company.