Chapter 11 Helps Small Businesses Restructure
In the field of bankruptcy law, there are typically a number of bankruptcy options available to debtors at any given time. Small businesses often must choose between Chapter 7, Chapter 13, and Chapter 11 bankruptcy, each of which has its own benefits and drawbacks. Chapter 13 bankruptcy requires small businesses owned by a partnership, corporation, or limited liability company to sell available assets, while Chapter 7 bankruptcy pertains only to businesses owned by individuals. Thus, for certain types of small businesses, Chapter 11 bankruptcy is the only option that allows them to continue operating. A business can restructure its finances and implement a reorganization plan, contingent on the approval of a bankruptcy court. Chapter 11 plans can help small businesses to balance their income and expenses, primarily by modifying payment terms and reducing obligations. In some cases, Chapter 11 debtors may pay off outstanding claims or downsize the business. As a result, the business can continue to operate and attempt to regain profitability.
