The bankruptcy process for businesses in general is through a Chapter 11 filing. We covered this topic in an early post, Bankruptcy Provisions For Business, where we looked at how the Chapter 11 process worked for all businesses. Small businesses can be dealt with in slightly different ways.

Bankruptcy is a serious issue so for any business contemplating the option, speak to a specialist lawyer first. In many cases, you have employees to consider as well as your creditors and your self. Businesses that have less than 2 million dollars in debt are considered small businesses and treated as such during the bankruptcy process.

For a small business to proceed through a Chapter 11 filing they must meet several conditions. One of the most important is that they have a viable product or service and a viable plan to trade their way back out of debt and back to profitability. A Chapter 11 filing is not an attempt to have all debts discharged; it is designed to give a business owner a temporary break in debt repayments so that they can reorganize their affairs.

Generally speaking, a committee is formed with the seven top creditors represented. This committee agrees on the restructuring plan that the business owner puts forward. If a business is classified as a small business, this committee may not be called for. In fact, a small business can fast track their way through the process if they have a good product and a strong restructuring plan.

Chapter 11 is a complex bankruptcy process. Consult an attorney who specializes in business bankruptcies before starting. They may be able to prevent any nasty surprises.

Related posts:

  1. Bankruptcy Provisions For Business
  2. Bankruptcy And Sole Proprietors In Business