Can a Small Business File for Chapter 11 Bankruptcy?

Can I file for Chapter 11?

Can I file for Chapter 11?Chapter 11 bankruptcy is one of several ways businesses can seek debt relief. Although Chapter 11 cases are typically associated with large companies, smaller business owners can also take advantage of its protections. If you want to restructure your debts and continue operating your business, then this is an option to consider.

If your business has less than $2,566,050 in debt (as of 2016), then you are considered a small business debtor. As a small business debtor, there are differences from a typical Chapter 11 case. These differences include:

  • No committee: When a large business files Chapter 11, a committee is assigned to represent the interests of creditors. This is not the case when a small business debtor files for Chapter 11.
  • A reorganization plan deadline: Large business do not have a deadline to present a reorganization plan. As a small business owner, you must present your plan within 300 days. In some cases, your business may be able to extend the deadline.
  • Additional oversight: The Trustee provides more oversight in a small business Chapter 11 case because there is no creditors’ committee.
  • More exclusivity: During a Chapter 11 case, creditors propose their own reorganization plans. Creditor reorganization plans may attempt to liquidate or take over your assets and business. As a small business, you have 180 days of exclusivity to propose your own plan. During this time, creditors cannot propose their own reorganization plans. Large businesses have 120 days of exclusivity.
  • Waived disclosure statement: The court may not require you to submit a disclosure statement to creditors or other parties. Disclosure statements contain detailed information about your business and are expensive to file. If the bankruptcy court waives this requirement, then it could reduce the complexity and cost of completing your Chapter 11 case.

What if Chapter 11 Bankruptcy Is Not Right for My Business?

If Chapter 11 is not the right solution for your business, then you may choose other options for debt relief. Sole proprietors can file Chapter 13 bankruptcy, which allows you to pay back your debts over a three to five-year repayment plan. You may keep your assets and discharge debts at the end of the Chapter 13 case. Chapter 7 bankruptcy is another possible option.

The Manalapan bankruptcy attorneys at Garland & Mason, L.L.C can help struggling business owners manage problems with debts.

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