Corporations and Other Business Entities Which Seek To Remain In Business Rather Than Liquidate
A corporation, LLC, or other business entity typically chooses a Chapter 11 bankruptcy where it generates enough cash flow to continue operating, but not enough to pay debts in full or on schedule. If the business elects not to liquidate, a Chapter 11 case may allow it to keep its assets and restructure its business and its debts.
The primary advantage to a business over a Chapter 7 bankruptcy is that Chapter 11 allows the business to continue operating during the proceeding, rather than requiring a liquidation of assets. In addition, filing Chapter 11 bankruptcy gives businesses and individuals alike many allowances that may help remove them from financial straits. While filing Chapter 11 bankruptcy is by no means a simple process, many who do so improve their financial position over time.
A Chapter 11 bankruptcy may allow a business to do the following:
- Reject burdensome leases
- Abandon burdensome assets
- Restructure secured debt
- Pay back taxes over time
- Eliminate a portion of unsecured debt
A small business seeking bankruptcy protection will often face additional considerations.