For small businesses in financial trouble, Chapter 11 bankruptcy can be a way to eliminate debts during restructuring, and it can allow the business to continue to operate normally. Below is some additional information on this bankruptcy option.
An Explanation of Chapter 11 Bankruptcy
Chapter 11 is just one part of the US bankruptcy code, and most of us hear about it only when a large corporation has financial worries and files for bankruptcy. However, most Chapter 11 cases come from smaller companies. Under Chapter 11’s rules, a business can restructure via a court-approved reorganization plan. By changing payment terms and reducing debt load, Chapter 11 can help the debtor balance their expenses and income, continue operations and remain profitable.
Special Exceptions for Small Businesses Filing Chapter 11 Bankruptcy in Tucson
In most cases, major companies and small businesses follow the same rules during Chapter 11 reorganization. However, there are some special rules for small-business debtors, which allow them to get through the program faster, reducing restructuring and legal costs. For the purposes of this guide, a ‘small business debtor is an entity or person engaged in business, and owing less than $2,490,925 in debt. Below are additional special procedures for small businesses filing Chapter 11:
No creditor committee meetings: In small business cases, the court can order that the creditors’ committee be omitted from the proceedings, saving the debtor time and money.