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How can Chapter 11 bankruptcy help businesses overcome debt?

Dealing with debt is never a pleasant experience. This is true on both a personal and business level. For business owners in Pennsylvania, dealing with business debt could risk the longevity of the company. Therefore, it is important to understand what debt relief options are available. This can help business owners weigh in on whether filing for bankruptcy is their best option for the present and future status of the company.

How can Chapter 11 bankruptcy help businesses overcome debt? The Chapter 11 process is designed to assist with the reorganization of businesses that are dealing with heavy debt. This process is most often associated with corporations; however, it is a viable solution for small businesses as well.

When a business decides that Chapter 11 is their best route, a petition must be filed. This not only initiates the process, but also begins the protection the bankruptcy process provides. Once the petition is filed with the court, the case will begin and an automatic stay on all collections actions begins.

Once a business files for Chapter 11 bankruptcy, the business is able to go about its business affairs without interruption. During this time, the business will figure out a repayment plan under the supervision of the court. Because the goal of this process is to help the company remain profitable, a debt reorganization plan will be made and filed with the court.

If a reorganization plan is deemed reasonable and is made in good faith and in compliance with the court, than the court will likely approve it. Once confirmed, certain debts will be discharged while other debts will be repaid to creditors via the repayment plan.

While it can become a complex process, taking the step to filing for bankruptcy can provide real and profitable solutions for struggling businesses. Business owners dealing with debt should understand their rights and options to obtain a fresh financial start.

Source: FindLaw, "Chapter 11 Bankruptcy," accessed April 23, 2017

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