Keeping Your Business Open With Chapter 11 Bankruptcy
If your business is struggling due to recent economic circumstances, or as a result of circumstances that could change in the future, bankruptcy could be a way for you to catch up on business debts with creditors while remaining open and operational. Many business owners assume that filing for bankruptcy means that you will need to close the business. Yet Chapter 11 bankruptcy does not require a business closure at all. This type of bankruptcy is distinct from Chapter 7 bankruptcy, which does require a business to close and for its assets to be liquidated. In order to understand more about keeping your business open with Chapter 11 bankruptcy, our West Palm Beach bankruptcy attorneys want to provide you with more information about this type of bankruptcy.
Understanding Chapter 11 Bankruptcy
Many different types of businesses and individuals file for Chapter 11 bankruptcy. Often, Chapter 11 bankruptcy is used by businesses to reorganize debts while remaining open and continuing to serve clients or customers. To be sure, when a business files for Chapter 11 bankruptcy, that news does not indicate that the company is going out of business. Rather, it has filed for a reorganization bankruptcy to reorganize debts and, ultimately, to help the business become solvent in the future.
It is important to know that it is not only businesses that file for Chapter 11 bankruptcy. Individuals can also file for Chapter 11 bankruptcy. Accordingly, the benefits of keeping a business open are not the only benefits of Chapter 11 bankruptcy. While most individuals who want to file for reorganization bankruptcy will file for Chapter 13 bankruptcy, not all individuals are eligible for Chapter 13 bankruptcy due to the debt limits associated with it. In those situations, a debtor who is otherwise eligible for Chapter 13 bankruptcy but for the debt limits will file for Chapter 11 bankruptcy.
How You Can Keep Your Business Alive with Chapter 11 Bankruptcy
How does a Chapter 11 bankruptcy allow a business to continue operating? First, the automatic stay — an injunction that attaches as soon as you file for bankruptcy — prevents creditors from continuing to take any type of legal action. Accordingly, your business cannot be sued for debts after your business has filed for bankruptcy, and debt collectors cannot attempt to repossess any of the assets you need to run your business.
Then, through the reorganization plan, your business will reorganize its debts and will make payments during the period of the repayment plan. That plan will typically last from six months to two years depending upon the business’s circumstances and the terms of repayment under the plan. During that time, the business will usually take on the role that would be played by a trustee and will provide reports while making payments. Throughout the repayment plan period, the business can continue operating. Once the terms of the repayment plan are completed, as long as the business has met the terms, it can be caught up with creditors and can continue to run the business without any further requirements.
Contact a Chapter 11 Bankruptcy Attorney
To learn more about keeping your business open through a Chapter 11 bankruptcy, contact one of the West Palm Beach bankruptcy attorneys at Kelley Kaplan & Eller.