When your business goes through a long period of losses and mounting debts, a Chapter 11 bankruptcy offers an option for relief. It helps business owners who don’t want to close their business and feel there’s a possibility of bouncing back. This overview explains what this type of bankruptcy entails, so you can determine if it’s a viable option to help you handle your business’s debts.

What Is a Chapter 11 Bankruptcy?

Essentially, a Chapter 11 bankruptcy does for businesses what a Chapter 13 does for individuals. It provides business owners an opportunity to create a debt repayment plan that will allow them to meet their financial obligations without having to forfeit their assets. This is particularly helpful to business owners who feel their financial problems are only temporary since having to liquidate their assets in another type of bankruptcy would force them out of business.

Since business owners must meet the terms of the repayment plan they create, it’s vital to analyze their situation in a realistic manner. An attorney may be helpful in reorganizing the business’ structure to ensure their repayment obligations can be met. If the repayment plan is actionable, a Chapter 11 provides the business owner a second chance.

What Can You Expect From the Filing Process? 

When a business owner does file for bankruptcy, it’s important to be prepared for the various steps in the process. In this type of filing, they must create a debt repayment plan that will allow them to meet the obligations they have to their creditors, while still operating their business. In some situations, it may be preferable to ask the business’s creditors to recommend a repayment plan.

The “debtor in possession,” or the business owner filing for Chapter 13 bankruptcy, will be allowed to continue operating their business. The company will continue as usual throughout the bankruptcy filing and as the debts are repaid. In some cases, such as those involving fraud or embezzlement, a bankruptcy trustee may be appointed by the court. This individual will oversee the business’s operations to ensure the company is adhering to the repayment schedule, and the company’s finances are above board.

Another important aspect of a Chapter 13 filing is that the business is restricted in pursuing certain actions. Some activities, such as liquidating assets, cannot be done without the permission of the bankruptcy court. Other actions restricted in this type of bankruptcy include altering a lease agreement, stopping the company’s normal activities, or attempting to sell the business.

Filing for a Chapter 11 bankruptcy is just one option open to you when your business is suffering from debt troubles. Located in Rochester, NY, William C. Rieth concentrates his practice on providing bankruptcy services, and that means he’s skilled in knowing how to help each client obtain debt relief. Since every client’s needs are different, calling (585) 232-6520 to schedule an initial consultation is the best way to get started. You can visit his Facebook page to learn more about his office’s practice.