Chapter 11 and Subchapter V

While people often think of bankruptcy as a way to close a business, in fact there are different types of bankruptcies available depending on your goals and circumstances, and some types of bankruptcies can be used to save your business.

In today’s volatile economy, many business owners, small and large, find themselves burdened by financial difficulties. Under federal law, a debtor — typically a corporation or partnership — may attempt to suspend its debt obligations by filing for relief under Chapter 11 of the United States Bankruptcy Code. Usually, a company that files for debt relief under Chapter 11 retains control of its assets and continues operating its business while the enterprise undergoes restructuring. During this time, any litigation that has been brought against the business owner, who under Chapter 11 is referred to as the debtor-in-possession, receives the benefit of an automatic stay, which places all debts on hold until the debtor is able to restructure them with court approval. A debtor in Chapter 11 may continue to operate its business while the court proceedings are pending.

Subchapter V of the Bankruptcy Code is a subdivision of Chapter 11 that allows a debtor with debts below a certain limit to proceed more expeditiously and efficiently through the restructuring process.

An individual business owner may also need a related personal bankruptcy if the business files Chapter 11 (or Subchapter V) because the business and personal debts are often intertwined. Filing a Chapter 11 allows you to deal with all of your creditors in one, streamlined process, so that you can take a cohesive approach to negotiating with your creditors and paying down what is owed. Your creditors, who are divided into similar groups called “classes,” then vote to accept or reject your plan.

In Chapter 11 cases, we help to stabilize business operations, address any immediate issues that threaten to undermine the reorganization process, negotiate with creditors, and prepare a plan of reorganization for bankruptcy court approval so that your business can survive and thrive.