As a Pennsylvania business owner, you have probably been concerned over last few years as giants toppled. Seeing other businesses fail can make you nervous, especially if you have been struggling with your own company’s finances. Taking on more debt to keep your business going may have been a temporary fix, but now you are dealing with creditors who are impatient for what you owe them.
If you are struggling with these obligations, you may be looking for a solution that will allow you to deal with your business debt effectively with the best chances of moving forward successfully. One path that other businesses have taken when they face overwhelming debt is to file for Chapter 11 bankruptcy.
Getting started toward debt relief
Chapter 11 is not limited to big businesses and national corporations. Even if you are a sole proprietor, you could be eligible for the protection of Chapter 11. To qualify for Chapter 11, your debt must exceed the maximum allowed for Chapter 13, which typically fluctuates as laws change. After filing for Chapter 11, you become a “debtor-in-possession,” meaning that you still have ownership of your property as its trustee. You can continue running your business, accepting contracts and even obtaining loans, if the court approves these steps.
When you apply for Chapter 11 protection, you will submit a disclosure statement to provide the court with relevant information about your business, its operations and financial details. The court uses this information to determine the best way to reorganize your debt, if possible. If the court approves your disclosure statement, your next step is to propose a plan for repaying your creditors. This involves prioritizing the classes of debt you owe. The court and your creditors must approve of the plan.
Putting the plan in motion
If your application and proposal gain approval, the court will appoint a third party to execute your repayment plan. This may involve selling some of your assets and restructuring the way you operate for maximum profit. After several years of following your plan, the court may discharge any remaining debt.
Because you are likely dealing with some sophisticated creditors, you might find the process of seeking Chapter 11 debt relief to be overwhelming. However, having reliable legal information often improves chances that a business will emerge from Chapter 11 and continue on the road to solvency and success.