4 Things Business Should Know About Chapter 11 Bankruptcy

As a business owner, there are a lot of things you’ll come to discover about finances and accountability just through the daily needs of your business. Business owners need to be prepared for any eventuality and able to flexibly and creatively handle financial emergencies and disruptions. Unfortunately, one of these disruptions can involve bankruptcy. You may be trying to learn about your options in regards to filing for bankruptcy, either because of recent disruptions to your cashflow or just because you like to be prepared. There are different ‘chapters’ or types of bankruptcy that businesses and individuals can declare, and one that more business owners should know about is Chapter 11. Here’s a look at four things that business owners should clearly understand about filing for Chapter 11 Bankruptcy.

Reorganization Bankruptcy

First, you should probably understand just what Chapter 11 bankruptcy is in comparison with other types. Chapter 11 is commonly referred to as reorganization bankruptcy. It’s much different from what most individuals perceive as bankruptcy. In this filing, you’ll propose a plan to reorganize the company to stay in operation and pay your creditors back over time. This plan or petition will be submitted with the bankruptcy court in your local area. Since it revolves around reorganization, you will be able to continue business operations and keep your enterprise afloat.

This Can Be Voluntary or Involuntary

Chapter 11 bankruptcy can be filed voluntarily or involuntarily. This means that it can be filed by the business owner or a creditor who is demanding that the business owner file bankruptcy to pay back what they owe. When you attempt to submit your own petition for bankruptcy under Chapter 11, it’s considered a voluntary filing. But if the creditors that you owe enact their rights under the bankruptcy law, they can file a petition with the bankruptcy court as well. Voluntary filings are the most commonly seen, as business owners want to work to get relief from their debt load while still being able to keep their doors open for business.

You’ll Need to Submit Lots of Paperwork

Like many bankruptcy declarations, Chapter 11s involve a good amount of paperwork. To get your petition accepted for consideration, you’ll need to submit multiple documents to the court. These include a schedule of assets and liabilities, a schedule of executed contracts and leases, statement of your financial affairs, and your current income and expenses. These documents will need to be submitted with their respective forms that can be found online at the Judicial Conference of the United States website. If you have further questions about bankruptcy law and paperwork, you can contact a legal firm that specializes in debt relief.

There’s A Filing Fee

Unfortunately, to file for this type of bankruptcy, you’ll need to come up with the money for a filing fee. This is typically $1,167 for the case itself. Then, you can expect to pay an administrative fee on top of that of about $550. You’ll pay the clerk of the court that you’re filing with directly. In some cases, installment arrangements can be made. However, it’s less likely for a business to get approved for this type of payment plan than an individual.

Hopefully, you’ve learned some necessary things about filing for business bankruptcy under Chapter 11. As you can see, this type of bankruptcy doesn’t alleviate your debts. Rather, it helps to establish a payment plan that your business can honor to willingly get out of debt with your many creditors. As such, it can be a good option for business owners with the determination to pay off their debts, who just need a bit of reorganization and rescheduling to work through a financial decline.