Many people in Georgia believe that bankruptcy is the end of the road for a business. Contrary to popular belief, Chapter 11 bankruptcy actually offers a more financially secure future for small and large businesses alike. Business owners can use Chapter 11 to reorganize their debts, restructure their businesses and avoid things like asset liquidation.
Is Chapter 11 bankruptcy just for businesses?
Chapter 11 is most frequently used by businesses. It is not just large businesses filing, either. Small businesses — meaning those with fewer than 500 workers — actually make up the majority of Chapter 11 bankruptcy filings. In rare cases an individual with considerable earning potential and debts that exceed the limits for Chapter 7 and Chapter 13 bankruptcy might also qualify.
The benefits of Chapter 11
For most businesses, the goal of Chapter 11 is to become profitable once again. Debts are not necessarily discharged right away, and instead are typically negotiated to lower payments and prioritized in a repayment plan. Most businesses also renegotiate leases and contracts during this period, too.
Filing for Chapter 11 can be quite an involved process. Businesses must be ready to demonstrate financial need by providing a number of different documents. Some documents that a small business should have prepared include:
- Statement of operations
- Cash flow statement
- Recent balance sheets
- Most recent federal tax return
Financial stressors are often temporary, but can have long lasting impacts. Getting a business back up and running after even a minor financial setback is often a herculean task. For Georgia business owners who are struggling to be profitable again, Chapter 11 bankruptcy might provide a solid path forward.