You may be considering bankruptcy when you are facing financial difficulties. Understanding the different types of bankruptcy can help you make better decisions about your company’s future. These are the main points that chapter 11 can be used for businesses.
What Is Chapter 11?
Chapter 11 is a reorganization bankruptcy. The reorganization plan is essentially a way to reduce costs, increase profits, and manage large amounts of debt.
Chapter 11’s ultimate goal is to keep your business open and have financial success in the future. This is important because it means that you, as a business owner can still operate your business while you file for chapter 11 bankruptcy. If the bankruptcy court permits, you might be able to borrow money for your business in the future.
Which Organizations Are Eligible to Apply for Chapter 11?
Small businesses and large companies can file a chapter 11 bankruptcy. However, depending on the business’ size and financial situation, the court may assess its prospects for future profitability. The amount of debt a company has is also considered by the court. These debt limits are increased by the CARES Act.
What Information Are You Required to File for Chapter 11?
A business must provide financial documents to help compile the required information for bankruptcy court. These include:
- Copies of federal income tax returns
- Cash flow records at the moment
- Records of outgoing and incoming expenditures
- Documents to support your assets and liabilities
Some Things You Need to Know About Reorganization Planning
According to the court, the business owner (or “debtor”) is the one who submits a plan for reorganization to the bankruptcy court. It outlines the steps a business will take to restructure its business and make it profitable or financially sound. It is an essential component of the business’ future.
The bankruptcy court reviews the case and then decides whether to approve the plan. Sometimes, the court may decide that chapter 7 bankruptcy is the best option for the company. This would mean complete liquidation.
This post was written by Trey Wright, one of the best bankruptcy attorneys in Tallahassee, Florida. Trey is one of the founding partners of Bruner Wright, P.A. Attorneys at Law, specializing in bankruptcy law, estate planning, and business litigation.
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