Small business owners with a lot of debt may decide to seek relief through a Chapter 11 bankruptcy. In some cases, it might be possible to continue operating your business during the pendency of your proceedings.
Filing for Chapter 11 allows business owners to restructure their debts and devise a plan to operate their companies profitably after the bankruptcy has been completed.
Chapter 11 is a good way to hold off your creditors from taking further collection actions. Once the bankruptcy petition is filed with the courts, your creditors will be notified and you will get a little bit of breathing room to work out a repayment plan going forward.
Typically, under a Chapter 11 bankruptcy, the company assets are not liquidated. However, there are cases where liquidation could occur for debtors in possession. That's the term for business owners who continue to operate their companies after filing for bankruptcy protection under Chapter 11.
Liquidation of some assets is not necessarily a bad thing, as it can provide more economic advantages to the debtor than liquidation under Chapter 7 bankruptcies.
The debt reorganization plan you submit has to be approved by the creditors who are owed no less than two-thirds of your debt and over 50% of the total claims for repayment. To liquidate assets, your creditors will have to agree to the plan.
Whether to file for Chapter 11 should not be a decision made in haste. You and your Tampa bankruptcy attorney should review your financial situation and devise the best strategy that will allow you to emerge from this financial crisis with the least amount of permanent damage.