What Can A Chapter 11 Do For My Small Business

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.

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