Chapter 11 bankruptcy is a form of bankruptcy designed for businesses that want to restructure their debts while keeping their doors open. This form of bankruptcy is helpful for those who may find that their debts are outweighing the profits but that they have can make changes to make the business more profitable with the help to do so.
In a Chapter 11 bankruptcy, your business needs to submit a plan of reorganization. This reorganization plan needs to be approved by the court and your creditors. The goal is to set up a schedule to repay debts, cut expenses and find a way to emerge from bankruptcy in which the business will begin bringing in a profit.
What information do you have to submit during a Chapter 11 bankruptcy?
During a Chapter 11 bankruptcy, you need to submit:
- A schedule of your assets and liabilities
- A schedule of executory contracts and unexpired leases
- A schedule of your expenditures and current income
- A statement that lists all of your financial affairs
By listing out these items, the court can look at the state of the business to determine if a suggested reorganization plan is acceptable. Usually, you will need to submit a disclosure statement with that plan of reorganization, so that the creditors who will look at the plan can decide if they agree or not.
Will you have to fire workers to make reorganization work?
It’s possible. Although many employers want to keep all of their employees working throughout the Chapter 11 bankruptcy, there is a chance that you will need to cut costs by laying off or terminating employees. For example, if your business has six employees but four would be able to cover the workload, two of the employees could be let go to save the company money until the company could afford to bring them back when profits are higher.
What if reorganizing won’t make enough of a difference?
If reorganizing won’t make enough of a difference to make the business profitable, it may be time to consider shutting down. This is something to discuss with your legal team as you go through the process of determining the best option for saving your business.