There are many different types of bankruptcy available to people in an assortment of different circumstances. Those who own and operate successful businesses may want to consider Chapter 11 bankruptcy. Chapter 11 bankruptcy involves the reorganization of a business or an individual’s finances.
Both the individual business owner or the business itself could qualify for Chapter 11 bankruptcy proceedings. During Chapter 11 bankruptcy, the goal is to rework certain financial obligations and help improve financial circumstances so that the business or filer can become solvent again.
Chapter 11 bankruptcy can be more complex than other options, but it is a common choice for a reason. There are a variety of benefits associated with Chapter 11 bankruptcy proceedings, and the three below are among the most compelling.
No trustee calling the shots
In many types of bankruptcy, the courts appoint a trustee. That trustee determines the repayment plan in a Chapter 13 bankruptcy and whether liquidation of assets is necessary in a Chapter 7 filing. During Chapter 11 bankruptcy, business owners can retain control of company operations and manage the entire process. Individual filers can make their own decisions about how they restructure their finances to improve their circumstances in a Chapter 11 case.
Improved outcomes for filers and creditors
By providing an automatic stay and granting the filer an opportunity to rework finances independently, Chapter 11 bankruptcy can promote the best possible outcome. Creditors have a chance to make arrangements for repayment that work for the filer, which can help maintain positive working relationships. The filer can also ensure that the terms set allow them to rebuild after a difficult financial period.
No income tax return interception
In other types of bankruptcy, the income tax return due to the filer is subject to interception. The courts may seize the tax return to help repay creditors during the bankruptcy process. In a Chapter 11 case involving a business owner, their income tax return is not at risk of seizure. That can be beneficial for those going through a difficult time financially.
Exploring the various benefits of Chapter 11 bankruptcy with a skilled legal team can help people choose the right solution when they’re facing temporary financial hardship. A Chapter 11 filing can help a business or a business owner restructure debt in a way that helps ensure financial stability in the long run.
