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Liquidating a business through Chapter 11

If you are the owner of a small business and want a fresh start from your debts, then you have many options open to you. It is important to remember that by filing for bankruptcy, you are not admitting defeat, but instead taking action to strategically move forward.

Of the small businesses that do opt for a bankruptcy filing, many decide to file with Chapter 11 over Chapter 7. This can be because Chapter 7 generally requires that the business shuts down completely and goes through a full liquidation process during the filing.

Chapter 11, however, is more focused on a slow and steady way to pay off debts through the income of the continuing business over time. That said, it is possible to go through a liquidation process in Chapter 11 bankruptcy.

Chapter 11 and liquidation

You may find that if you have your liquidation plan accepted under Chapter 11, there are more economically strategic ways to liquidate your business in comparison to Chapter 7.

What are the advantages and disadvantages of Chapter 11?

The advantages of liquidation under Chapter 11 is that you have a great deal more flexibility, and can choose to liquidate only the assets that you think should be liquidated. However, you should also consider the disadvantages in addition. Under Chapter 11, you will not be automatically be given relief from small business debts, as you may do under Chapter 7.

As a small business owner, the choice of whether to commit to Chapter 11 bankruptcy will define your future. Make sure you consider it carefully and strategically.

Source: FindLaw, “What Is Chapter 11 Liquidation?,” accessed Jan. 19, 2018