Chapter 11 (Small Business)

Chapter 1​1 bankruptcy is the reorganization chapter in the Bankruptcy Code, which allows individuals and businesses to ​reorganize their debts they owe creditors by paying under a “reorganization plan” approved by the Bankruptcy Court. Individuals ​often file a Chapter 1​1 bankruptcy because they are not eligible for a Chapter ​13 bankruptcy due to their high-amount of debt. Businesses are often forced to file a Chapter 11 bankruptcy​ if they seek to reorganize debt, because the law does not allow businesses to file a Chapter 13.

​The advantage of filing a Chapter 11 bankruptcy over Chapter 7 bankruptcy​ is the advantage of not having to terminate business operations or liquidate business assets to repay creditors, which would probably have to be done in a Chapter 7.

If you file for bankruptcy under Chapter 11, you will be required to propose a plan to reorganize your debts and pay back the money you owe to your creditors. This plan would have to be approved by the bankruptcy court and is subject to a vote by creditors. While Chapter 11 bankruptcy offers ​some flexibility and options that include the ability to negotiate with creditors,​ Chapter 11 bankruptc​ies are complicated​ and can be much more costly than other types of bankruptcy. ​

​Currently, Katz Law only assists small businesses in Chapter 11 cases. ​​​​​

​​​A small business debtor is defined as a business entity or an individual that is engaged in business whose aggregate non-contingent debts (excluding debts to affiliates or insiders) do not exceed $7,500,000 and which elects to be treated as a small business. In February 2020, the Small Business Reorganization Act of 2019 (the “SBRA”) went into effect which provided new procedures by which small businesses can seek Chapter 11 bankruptcy relief in a more fast-paced setting when compares to standard chapter 11 cases.

​​ To determine whether you or your business is eligible for a small business chapter 11 bankruptcy, contact us now!


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