Facing significant debt as a business owner can quickly become overwhelming. While your business may still be making money, you might struggle to pay your creditors or worry about the future of your company.
One option you might consider is filing a Chapter 11 bankruptcy. Chapter 11 bankruptcy is typically reserved for a range of small business owners, including partnerships, limited liability companies, corporations and sole proprietors. If you fall into this category, it is important to understand how Chapter 11 bankruptcy works and what the benefits include.
Rebooting your company
One way to think of this is as if you are rebooting your company. Chapter 11 is called reorganization bankruptcy, and the goal is not to liquidate all of your assets or close your doors. With this, your business is going to file for bankruptcy, re-organize, become more efficient and then continue running.
If you have heard the myth that bankruptcy means you must shut down, it is very important to understand that this is usually not the case. Some businesses do close after filing for bankruptcy, but you do not have to do so under Chapter 11.
What is the goal?
If the goal is not to sell your assets, pay your debts and close your business, then what are you trying to do?
In short, Chapter 11 allows you to re-organize your finances to make your current debt affordable In this sense, it is more similar to Chapter 13 bankruptcy than Chapter 7. When all goes as planned, your debt is modified based on the income of the company, giving you the time and financial freedom to stabilize your business and your financial future.
In fact, that income is the reason that Chapter 11 is sometimes used. It can be possible to have debts where you cannot afford to pay everything back as currently structured. In this case, Chapter 11 can provide a lifeline, allowing profitable businesses to restructure debts and continue operating. This can give businesses a fresh start and a new way to succeed.
Bankruptcy does not signify the failure or end of the business. Rather, it is just one step that can be taken to get the business properly functioning again. For business owners looking for options to relieve their debts, working with a bankruptcy attorney can provide you with the information you need to get started. Gudeman & Associates has a proven track record of helping Michigan business owners survive financial hardships and retake control of their financial wellbeing through bankruptcy proceedings. With over 75 years of combined tax and bankruptcy experience, your financial future is safe in our hands. Our bankruptcy attorneys work hard to ensure your interests are well protected. Contact us today to schedule a free 30-minute consultation.