Many businesses in Kentucky go through trying times where they must make significant changes to stay afloat. If you find that your business is struggling financially, you may not be aware of your options. Filing Chapter 11 bankruptcy is a route that many business owners take to restructure their business to pay off debts without being forced to shut down operations. If you are considering filing Chapter 11 bankruptcy to keep your business open, you should be aware of how the process works.
What is Chapter 11 bankruptcy?
Chapter 11 bankruptcy allows a business to restructure obligations to pay off debts. In cases where there was no fraud, dishonesty or gross incompetence, the business may continue to run as before with the debtor, or business owner, remaining in control. If the previously mentioned issues occurred, an appointed trustee will take over through the bankruptcy process. The business must ask the court’s permission to make certain decisions related to business operations.
Pros and cons
As a business owner, it is important that you understand the pros and cons of Chapter 11 bankruptcy before making the decision to file. The main benefit is being able to maintain relatively normal operations without turning over control of the business. This provides a way to generate funds that you can use to keep going and pay off debt. Creditors are generally accepting of Chapter 11 bankruptcy, which makes the debt payoff process easier.
One of the main cons of Chapter 11 bankruptcy is the complexity and financial costs. Filing Chapter 11 bankruptcy requires you to pay extensive legal costs to initiate the process. You must come up with a reorganization plan that the bankruptcy court approves of and that will allow you to continue to pay off your debts.
Eligibility
Corporations, partnerships and limited liability companies most often file for Chapter 11 bankruptcy. If you decide to file, you must first present your reorganization plan to the bankruptcy court for approval. This plan should include details on how you will reorganize assets and negotiate to pay off debts. If the court approves your plan, the process will move forward.
Seek legal advice when considering Chapter 11 bankruptcy
Filing Chapter 11 bankruptcy is a big step for a Kentucky business owner. If you believe that this process will benefit you in keeping your business running in the long term, it is important that you work with someone with considerable bankruptcy law experience and who can help you make the right legal decisions. Chapter 11 bankruptcy can be a long, costly and stressful process, so it is helpful to have someone trustworthy on your side.