Business Debt In Chapter 11

: Reese Baker & Associates

  Filed under: Chapter 11

Business Debt In Chapter 11As the holiday season approaches many people worry about their holiday shopping budget, but for many small business owners the season could be the difference between going out of business or staying on track for a stronger financial year in 2017.

However, there are still many companies out there facing growing debt burdens and shrinking revenues. For those looking to balance their debt obligations and remain in operation to, hopefully, boost business, resolving business debt inĀ Chapter 11 bankruptcy could help reorganize the financials of the company.

Business Debt In Chapter 11

Chapter 11 bankruptcy is similar to a consumer Chapter 13 bankruptcy that rolls debt obligations into one payment spaced out over a period of time. It is a debt restructuring option for businesses. While you may have heard about Chapter 11 when a major corporations file for bankruptcy and it makes the news, but the truth is that most cases are smaller businesses and corporations faced with financial difficulties.

The benefits of restructuring debts under Chapter 11 is that it allows the business to continue operations as normal. Rather than terminating business operations under a Chapter 7 dissolution, companies that are facing debt and end up with a feasible strategy to continue doing business while paying down debt.

The repayment plan works by reducing debt obligations to creditors and modifying existing debts to more favorable lending terms with lenders, such as a reduced interest rate or balance owed. It may also allow for the business to downsize by selling some assets to cover debts.

Small businesses get special provisions under Chapter 11, but what is considered a small business may vary. For example, if your business owes a total debt balance less than the specified amount to its creditors (currently just under $2.5 million), it qualifies under this provision. A Houston business bankruptcy lawyer will help navigate the waters and help you decide if Chapter 11 is right for your company.