Within the first 18 months, 8 out of 10 entrepreneurs who have started a small business will fail. Most of the time, these small businesses simply run out of capital. Instead of being dragged deeper into debt, consider filing for small business bankruptcy under chapter 11 provided that the business owes no more than $2,490,925 and restructure your business. Small businesses filing under chapter 11 are subject special provisions that are significantly different than personal bankruptcy cases that are filed under the same chapter. To make sure that you are getting the most of the filing, consult with a bankruptcy attorney. Here are 3 special provisions that you want to keep in mind.
Additional Reporting Duties
Personal bankruptcy cases filed under chapter 11 are quite simple and require very little paperwork. In comparison, small businesses filing for bankruptcy under chapter 11 can expect to be buried in paperwork. To ensure that the bankruptcy application is approved, you also must be up-to-date with all of the paperwork. You will need to attach the most recently prepared balance sheet for your small business, a cash flow statement, and a statement of operations. In short, there must be complete transparency to your business' operations.
Deadline for Chapter 11 Plan
Although those who are filing for personal bankruptcy under chapter 11 do not need to worry about deadlines unless otherwise stated by the bankruptcy court, small businesses have a compressed deadline. Reorganization plans under chapter 11 must be filed and submitted within 300 days of the initial filing. With the help of an attorney, this should not be a problem; however, you can request for an extension should you need more time.
Reduce Expenses by Eliminating Creditor's Committee and Disclosure Statement
Although the requirements for small business filings are generally stricter, they do offer some perks. For example, small business owners can request that no creditor's committee be appointed to the case. The creditor's committee is generally appointed to represent the interests of the unsecured creditors. In addition, small business owners can also request the courts to waive the disclosure statement, which is a big part of the chapter 11 bankruptcy process for individuals.
Filing for chapter 11 bankruptcy can keep your small business afloat although it is not easy. Speak with a bankruptcy attorney (such as one from Thomas M. Denaro, Esq.) to better understand all of the special provisions that you need to be wary of, and to get some professional advice when drafting up a reorganization plan.