Can a Small Business Continue Operating During Chapter 11 Bankruptcy?

Small businesses can keep their doors open after filing Chapter 11.

If you are a business owner and your company is struggling with significant amounts of debt, you may have already considered filing Chapter 11 bankruptcy. You may have also wondered if you could continue running your business if you do file. Fortunately, when you file Chapter 11 bankruptcy, you can typically continue your business operations. Below, our West Palm Beach bankruptcy lawyer explains in further detail.

Things to Know About Chapter 11 Bankruptcy

There are many important things to know about Chapter 11 bankruptcy before filing. These include:

• Reorganization: Chapter 11 is a reorganization bankruptcy. Chapter 11 is primarily used by businesses. Existing debt is restructured into a new repayment plan instead of being discharged or eliminated.
• Debtor-in-possession: During Chapter 11, you are known as the debtor-in-possession, meaning you retain control of the business. As such, you can continue to manage daily operations.
• Plan of reorganization: You must develop a repayment plan that allows you to repay all or most of the debt. The plan must be approved by the courts and your creditors.
• Financial decisions: While you can continue operating your business in most cases, any major financial decisions that are made may require court approval.
• Possible liquidation: If your company’s debts cannot be effectively restructured, you may have to shift to Chapter 7 bankruptcy. In this instance, you may not be able to continue operating your business, and it may have to close its doors.

Benefits of Chapter 11 Bankruptcy

All types of bankruptcy have certain benefits for borrowers, and this is true for Chapter 11, as well. The biggest benefits available for your business include:

• Continued business operations: Perhaps the biggest benefit of Chapter 11 is that it allows you to continue business operations, so you do not have to close your doors.
• The automatic stay: As in all bankruptcy cases, immediately after you file Chapter 11, the court will issue an automatic stay. This prevents lenders and creditors from taking legal action against you and from trying to collect on the debt.
• Debtor-in-possession financing: You may be able to obtain additional financial support to help with the reorganization process. You must show the court and the lender a strong plan to repay it.
• Affordable repayment plans: Repayment plans in Chapter 11 can eliminate some of the debt or extend the time to repay it. This can make it more affordable to repay.

Our Bankruptcy Lawyer in West Palm Beach Can Help Your Business

If your business is struggling with substantial debt, our West Palm Beach bankruptcy lawyer can help. At Brian K. McMahon, P.A., our experienced attorney, can help you through the process and ensure no mistakes are made so you obtain the best possible outcome. Call us today at (561) 658-1789 or fill out our online form to schedule a consultation and to learn more about how we can help.