Business Bankruptcy: Chapter 11

When a business files for bankruptcy, Chapter 11 is often the right choice. Chapter 11 allows a business to continue to operate despite having some debts forgiven and other debt balances reduced.  Many large companies have historically operated while under a Chapter 11 reorganization for several years before coming out of bankruptcy. 
If your company is having financial problems, Chapter 11 may be the right choice. However, Chapter 11 is a complicated type of bankruptcy that can be costly. You need to ensure it is the right option for you and you should speak with an experienced Melville, NY bankruptcy lawyer to review your company’s financial situation. Call Ronald D. Weiss, P.C. today for more information.

Chapter 11 Business Bankruptcy

When a company files for Chapter 11 bankruptcy, the company has the ability to remain open and operational during and after the bankruptcy. In order to be eligible for Chapter 11 business bankruptcy, the company must be a business that can become profitable once debt problems are resolved.
The Chapter 11 will involve renegotiating the debts that the business owes and entering into a plan to repay creditors. Some portion of debts may be forgiven or the terms of the debts renegotiated as part of the Chapter 11 reorganization contract.
In addition, executory contracts may be voided or the terms of contractual obligations changed. An executory contract is a contract in which both sides still have pending obligations. A chapter 11 debtor will have the option regarding whether to perform an executory contract and if the business decides not to fulfill its obligations, the other party’s damages for the breach may become part of the Chapter 11 repayment agreement.
Chapter 11 bankruptcy is a good option for a company that has a lot of debts or unfavorable leases or contracts but that could otherwise be successful if these issues were dealt with. A change in leadership may also be required as part of a Chapter 11.
Typically, a Chapter 11 bankruptcy makes sense only if your company has a large amount of debt or if your business is a bigger business. It is a complicated form of bankruptcy that tends to be more expensive than other types of bankruptcy filings and your company may operate for months or years while under a Chapter 11 reorganization.

Alternatives to a Chapter 11 Bankruptcy

Chapter 11 is not right for every business. If you are operating as a sole proprietor and/or have a smaller company and a more limited amount of debt, a Chapter 13 may be preferable. A Chapter 13 also allows for reorganization of debts to lower payments and reduce balances, but it is a simpler process. Chapter 13 bankruptcy is intended for individuals and not businesses, but if you are running a sole proprietorship a business bankruptcy essentially must be combined with a personal bankruptcy anyway since you and your company are the same legal entity.
Chapter 7 is also an option for both large and small businesses. However, Chapter 7 is a liquidation bankruptcy and your company will not remain operational if a Chapter 7 is filed. You should speak with a bankruptcy lawyer about whether a Chapter 7, Chapter 11 or Chapter 13 is best for your business.
Ronald D. Weiss, P.C. has extensive experience with business bankruptcy. Call today to speak with a Melville, NY bankruptcy lawyer who can help you throughout a Chapter 11 or other bankruptcy filing.