Advantages of a Chapter 11
The provisions of Chapter 11 bankruptcy enable businesses to obtain debt relief without liquidating their assets or closing their doors. Working with a bankruptcy attorney highlights the advantages of Chapter 11, such as:
• Continuing to operate. In contrast to Chapter 7, Chapter 11 reorganizes debt and allows the business to continue operating normally.
• Safeguard Assets. Since the debt has been restructured and will be repaid over time, there is no need to liquidate assets or distribute funds to creditors.
• All debts are dischargeable. Whether it's past-due taxes, rent-related debt, or legal fees, everything is on the menu in a Chapter 11 filing.
Variations in Chapter 11
There is no creditor committee. Creditors can form a committee to represent their interests in a Chapter 11 case, at the expense of the debtor. However, the bankruptcy court can safeguard the business by prohibiting the appointment of a committee. Working attentively with your bankruptcy attorney can offer additional protection.
• Timeframe flexibility. Despite the fact that small businesses have only 300 days to propose a Chapter 11 plan, there is typically no deadline so long as the proposal is made within a reasonable timeframe. In contrast to other business bankruptcy options, where deadlines are of the utmost significance, this one does not impose any. Despite the absence of a strict deadline, a bankruptcy attorney will guide you through the procedure in a timely manner, ensuring that your plan is feasible and well-presented.
• Disposable income. Unlike Chapter 13, which requires the debtor to turn over their disposable income to a trustee during the commitment period, Chapter 11 does not have this requirement. However, because the debtor can retain their disposable income, the quantity of their payment plan must at least equal their disposable income.
If you are uncertain as to whether your business should file for Chapter 11 or Chapter 13 bankruptcy, you should consult with a bankruptcy attorney to streamline your petition.
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