Bankruptcy: Chapter 11

Chapter 11 Bankruptcy

Small Business Debtor

Individuals may file under this chapter but it is used primarily for business debt. (Sole proprietor not included) A Small Business Debtor is one whose debts exceeds the limits of chapter 13 (unsecured $250,000 and secured $750,000) and has an aggregate non-contingent secured and unsecured debts of $2,000,000.00 or less. (excluding one who owns or operates real estate) If qualified the debtor can be fast-tracked and treated differently than a large corporation.

This chapter allows the debtor (business) to continue normal business activities while reorganizing (Like chapter 13) its finances so that it may pay its employees, reduce obligations to its creditors and produce a return for its stock holders. During this chapter the debtor retains possession of assets and continues operation. Plan may last up to 6 years.

The theory behind this chapter is that an ongoing business is of greater value than if it is foreclosed on and assets liquidated. After a successful chapter 11, the business can continue with a restructured debt load and operate more efficiently than before and in doing so preserve jobs and assets. Repayment of debts is made from future profits, sale of some assets, mergers or recapitalization.

Who Should Consider Chapter 11?

* Those whose unsecured business debt exceeds $250,000 and secured debt of $750,000 and whose total debt does not exceed $2,000,000.00.

* You have little chance of meeting your obligation under the current terms.

* Creditor's threatening legal action against your company.

* You have a viable going concern that would be ensured through debt restructuring.