Small businesses are the backbone of our country, but their struggles are real and numerous. So, if you’re a small business owner fighting to stay afloat, a chapter 11 bankruptcy may be the solution. The U.S. Bankruptcy Courts identify chapter 11 as a reorganization bankruptcy. One requirement is that you typically must be a business to file. Hence, corporations, partnerships and sole proprietorships are all eligible.
Chapter 11 Bankruptcy Requirements
Though rare, in a few circumstances, individuals may be able to file chapter 11. However, by and large, this form of bankruptcy filing is the domain of businesses, from large corporations to qualifying small business operations. And, to be eligible, you must convince the court that your company can remain profitable through your reorganization plans.
Typically, you remain in control of your business, and it continues to operate while it is going through reorganization. However, you must submit many business decisions to the bankruptcy court for prior approval, including the following:
- Breaking a lease or entering a new one for personal or real property
- Selling any assets
- Expanding your operations or shutting down any of them
- Modifying contracts or entering into new business agreements
- Hiring professionals or paying fees and expenses to them
And, most importantly, standards vary for different business structures.
Small Business Debtors
First of all, chapter 11 bankruptcy requirements for small businesses differ a bit from other business entities. And, in order to determine whether you qualify as a small business debtor, you must pass a two-part test.
1. You must be engaged in business or commercial activities.
- These activities many not primarily revolve around the ownership and operation of real property.
- Your business debts may not exceed $2,490,925.
2. The U.S. trustee must not have appointed a creditors’ committee for your case, or the court has determined that the committee is not sufficient in overseeing it.
In addition, qualifying small businesses must follow these requirements in court filings:
- Statement of operations
- Your company’s most recent balance sheet
- A cash-flow statement
- Your most recent federal business income tax return
As you can see, chapter 11 bankruptcies are complex, and filing is a complicated endeavor. So, turn to a skilled attorney at the Law Offices of Douglas Jacobson, LLC. As a result, he will provide guidance in the chapter 11 bankruptcy steps so you can focus on your business.