Facing mounting debts and shrinking revenues, many small businesses do not know where to turn for help. Filing for bankruptcy can help many small businesses, but it can also be a daunting prospect. Additionally, many businesses view Chapter 7 bankruptcy as a last resort, since it involves the dissolution of the company and the liquidation of its assets. On the other hand, Chapter 11, the alternative to Chapter 7 for small businesses, can be intimidating, time-consuming, and complex. A Tampa bankruptcy lawyer will help navigate the waters and help you decide if Chapter 11 is right for you, but here are some of the basics for your own knowledge.
Chapter 11 Basics
Chapter 11 bankruptcy is a restructuring option for businesses. Most often one hears about Chapter 11 when major corporations file for bankruptcy, but in fact the majority of cases are smaller businesses and corporations faced with financial difficulties.
The restructuring of debt under Chapter 11 often allows the business to continue operations as normal, according to a bankruptcy lawyer. This makes it far more appealing than a Chapter 7 dissolution for companies facing debt and seeking a feasible strategy to continue doing business.
The plan works by reducing obligations to creditors and modifying existing debts to more favorable terms with lenders. It also allows the business to downsize by selling some assets to cover debts, according to a bankruptcy lawyer.
Small businesses get special provisions under Chapter 11, as a bankruptcy lawyer will tell you. If your business owes less than the specified amount to its creditors (currently just under $2.5 million), it qualifies under this provision. If your business qualifies, talk to a bankruptcy lawyer about the provisions afforded under Chapter 11 to determine if it is the right course for you.