Facts about Chapter 11 bankruptcy include it can be used by small businesses looking to restructure, it can help an individual balance his expenses and income, and there are special provisions that can make the process less expensive, says Nolo. Chapter 11 bankruptcy can be an alternative to Chapter 13.Continue Reading
Chapter 11 bankruptcy can be used to restructure a small business, but the process is often time-consuming, risky and intricate, according to Nolo. A business can continue to operate while under bankruptcy as long as it's owned by a limited liability company, partnership or corporation. A debtor can better balance his income and expenses by lowering his financial obligations and changing the terms of his payment.
One of the provisions of Chapter 11 bankruptcy is that it doesn't require a creditors' committee, which can make the process more expensive, says Nolo. The committee is assembled to represent unsecured creditors and retain any professionals required for the bankruptcy process.
When filing for Chapter 11 bankruptcy, small business owners are required to file and report recent cash flow statements, balance sheets, federal tax returns and a statement of operations. Such reporting and filing requirements are usually only enforced for small business owners.
Small business owners who are filing for Chapter 11 bankruptcy have 300 days to create a Chapter 11 plan, according to Nolo. If the debtor can show he can have his plan approved within a specific period of time, he may be able to extend his deadline.Learn more about Debt Law