Many Tennessee business owners are worried about the economy. In fact, some are currently struggling to keep their doors open due to financial problems. In the past, many business owners have been able to take advantage of a valuable financial tool known as Chapter 11 bankruptcy in order to retain control of operations while a court-approved financial reorganization plan is put into effect.
Basic facts to know about Chapter 11 versus other types of bankruptcy
It is often difficult for the average business owner to determine a best course of action when facing a particular set of financial crisis circumstances. There are several types of bankruptcy, and a business owner might qualify for one but not another. The following list shows basic facts and differences between Chapter 11 and other types of bankruptcy:
- Chapter 11 does not require complete liquidation of assets.
- A business owner can retain control of operations during Chapter 11 proceedings. (There are exceptions)
- Chapter 11 may be filed by business owners or individuals, whereas Chapter 13 is restricted to individuals, only.
- Chapter 11 is the most complex form of bankruptcy.
- Chapter 11 does not require a certain amount of income while both Chapter 7 and Chapter 13 do.
The greatest benefit of filing a Chapter 11 bankruptcy is that a business owner does not have to close his or her doors. This means that he or she can continue to generate revenue in order to pay off debt or perhaps buy enough time to sell.
Chapter 11 bankruptcy is a financial reorganization plan
Either a business owner or lender may propose a restructured payment plan under a Chapter 11 bankruptcy. If a business proposes the plan, its lenders will have the right to challenge the proposal if they don’t agree with it.
Most financial crises are temporary, and sometimes, being able to reorganize assets and debt payments is all that is needed to get finances back on track when things have gotten out of hand.