Many small businesses in Kentucky and throughout the country have had a difficult couple of years. If your business took on more debt than it could afford, you may be considering filing for business bankruptcy. One option your company might have is a Chapter 11 reorganization.
Keep your business
One of the best reasons to choose Chapter 11 bankruptcy over Chapter 7 bankruptcy is that it will allow you to keep your business and many of its assets. Chapter 11 is a restructuring of debts instead of a liquidation of assets and debts. Your business can continue operating during the bankruptcy process, and you will retain control over business assets.
How the process works
In Chapter 11, a business owner works with a bankruptcy trustee to reorganize their debts and develop a repayment plan that they can afford. When the repayment plan is completed successfully, the remainder of debts will be discharged. During the bankruptcy process, the business owner retains control over their business with oversight from the trustee.
Subchapter V for small businesses
Chapter 11 is a more streamlined process for small businesses thanks to the Small Business Reorganization Act of 2019, which created Subchapter V. Provisions in Subchapter V allow small business owners who file for Chapter 11 bankruptcy to skip the creditors’ committee requirement and resolve their cases more quickly.
To qualify for small business bankruptcy, your business must have debt that does not exceed $2,556,050. As a business owner, you must be personally engaged in the activities or your business. If you qualify for small business bankruptcy instead of regular business bankruptcy, you will have significantly less paperwork and bankruptcy expenses.