When to file for Chapter 11 Bankruptcy

Owning a small business can be great. Many entrepreneurs have a strong passion the drives them to start a small business. But, all business ventures come with risk. One of the most common types of risk small business owner’s face is small business debt. When the debt from a business becomes unmanageable, the first thing a business owner should remember is that they are not alone. There are many sources for debt relief available.

As a small business person, there comes a point when you have to weigh the consequences of each decision you make. Many times, small business owners take out loans or use credit to make investments. Of course, these investments have the intention of helping the business. Unfortunately, many times those investments don’t produce the income expected, and the business owner is unable to pay back the debt incurred.

Chapter 11 bankruptcy has helped many businesses recover from business debt. When a business files for Chapter 11 bankruptcy, the debts are re-organized. This enables the business to re-pay creditors, and remain in business and become profitable. Small business debt can sabotage the entire life of a small business owner. This is why it is important to seek legal counsel. A lawyer experienced in business bankruptcy will help you make the best decision for your business. A bankruptcy lawyer will help you weigh the pros and the cons of the chosen decision. The more time a small business owner takes to seek legal counsel, the more complicated settling the small business debt will be.

What is a Chapter 11 Bankruptcy?

It is a flexible loan repayment mode protected by the courts. Who is eligible to file for a Chapter 11 Bankruptcy? As much as filing for Chapter 11 Bankruptcy is handy in averting a debt with bad consequences, it is not available to everyone. Chapter 11 Bankruptcy is available for people who have a enough assets to follow the re-organization plan, and are willing to offset some of the debt. Chapter 11 bankruptcy is the only bankruptcy option for a small business seeking continuance of operations during restructuring, if the small business is owned by a partnership, LLC, or corporation. Some self-employed individuals are also eligible.

Chapter 11 bankruptcy has rules that must be adhered to, and it is important that you follow these as they pertain to the outcome of your case. This is another reason why it is so important to seek legal counsel when filing for Chapter 11 bankruptcy. A qualified legal team will help make sure you understand the outcome, so that you can adhere to the decision made in your case.

Chapter 11 Bankruptcy Procedures

The first step is always filling a petition which by default serves as the debtors’ shield from creditors.

Second, the debtor files assets and liabilities, current income and expenditure, and financial statements.

Third, a trustee is usually appointed whose duty will be to manage the case. The trustee schedules a meeting between the creditors and the debtor to discuss finances and develop a repayment schedule.

Fourth, the judge calls for a confirmation hearing. This hearing is to decide whether the payment plans are in order and if they meet the Bankruptcy Code’s Standards. The debtor then begins making payments according to the plan to the trustee. The trustee then begins settling the debts with the creditors.

In most cases, creditors will cooperate with debtors who file for Chapter 11 Bankruptcy. Unlike other forms of bankruptcy, Chapter 11 bankruptcy is a way for the creditors to recover the outstanding debts..

Importance of filing for a Chapter 11 Bankruptcy:

  • Generally, the interest accumulated on the small business debt stops accumulating any further.
  • Shields your property from being used to recover the debt.
  • It saves you from losing your business.
  • Reorganizing your business through Chapter 11 bankruptcy saves you from public discrimination.

The shortcomings of filing for a Chapter 11 bankruptcy:

  • Filing for Chapter 11 bankruptcy can be expensive and time consuming.

Chapter 11 bankruptcy plan is a flexible and advisable process, available to any qualifying individual who has a small business debt they can no longer manage. The court will look at your current situation, and develop a reorganization plan to pay your current creditors. If the parties involved in negotiations use the appropriate channels, the small business debt will be reduced.


Seeking legal counsel is important for small business debt settlement. Bankruptcy lawyers have expertise and can help the debtor emerge out of the debt and return to profitability. It is vital to stick to and follow the right legal channels for the benefit of both the creditor and debtor. The debtor will be saved from losing so much more, including their dignity; whereas the creditor will also be saved from completely losing their money. At the end of the day, the Chapter 11 Bankruptcy is a win-win.

Understanding the process of a Chapter 11 bankruptcy can be hard. With the help of a lawyer from Hall and Navarro, it can be easily understood.

Please consult an attorney for advice about your individual situation. This site and its information is not official legal advice, nor is it intended to be. Feel free to get in touch by e-mail, letters or phone calls. Contacting us does not create an attorney-client relationship. Until an attorney-client relationship is established, please withhold from sending any confidential information to us.

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Bankruptcy Attorney
J. Michael Hall

Paige Navarro, Bankruptcy Attorney in Statesboro, GA

Bankruptcy Attorney
Paige Navarro

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