In the current economic environment, many businesses are experiencing financial difficulties. Small businesses are especially struggling to manage their debt against decreased revenues. As a result, many small businesses are on the verge of filing for bankruptcy. But, what type of relief can a small business get in a Chapter 11 reorganization bankruptcy?
- Stop garnishment of accounts receivables or bank accounts
- Ability to pay priority tax debt over 5 years
- Restructure secured debts (modify interest rate and other terms)
- Cure arrears on leases and contracts
- Reject unfavorable leases or contracts (including collective bargaining agreements)
- Typically pay unsecured creditors cents on the dollar
- Can provide a restructure of the operations or a sale or partial liquidation of the business
A small business debtor has a six -month exclusive period to develop a plan that sets forth how each of its classes of creditors are to be treated. This six-month period can be extended by the Bankruptcy Court but a small business debtor must file a plan no later than 300 days after filing for Chapter 11 bankruptcy.