Chapter 11 bankruptcy allows qualified businesses and individuals to negotiate repayment plans with their creditors. This form of bankruptcy allows you to keep most of your assets as long as you can make those payments on time and in full. But figuring out if it’s a good option means making sure you understand exactly who can file. Your Wisconsin business bankruptcy attorney can help you decide on the best option, but here’s how to tell if filing Chapter 11 bankruptcy is right for you.
Who Is Eligible for Chapter 11 Bankruptcy?
Chapter 11 bankruptcy can be an option for individuals, solopreneurs, sole proprietors, and larger businesses alike. Here are a few characteristics of businesses who may benefit from this type of bankruptcy most.
Businesses Who Want to Keep Their Doors Open
Chapter 11 bankruptcy allows you to maintain most of your business assets. You won’t have to sell them off just to settle your debt. For many businesses, this means being able to keep their doors open while still finding ways to get out of debt.
You’ll typically be able to continue operating as normal provided you make your payments to your creditors on time. Your employees will be able to keep their jobs, your customers and clients will continue receiving the services they rely on, and you’ll still be able to plan for future growth.
If you want to close your doors for good, filing for Chapter 11 bankruptcy is likely not your best option. Your Wisconsin business bankruptcy attorney will help you decide on the best type of bankruptcy for your long-term goals.
Those Who Have Money to Make Payments
To be eligible to file for Chapter 11 bankruptcy, you must have a reliable cash flow with enough money to make payments to your creditors. Keep in mind that the amount you’ll have to pay will typically be lower than what you’d owe if you didn’t file for bankruptcy.
If you don’t have a reliable cash flow in your business or can’t afford the negotiated payments, you’ll want to file for a different form of bankruptcy.
Companies Who Need Protection From Creditors
One of the biggest benefits of filing for Chapter 11 bankruptcy is that the court issues an automatic stay as soon as you file. This stay prevents creditors from hounding you for money and can alleviate stress if you’ve been dealing with threatening collections agencies.
If you’re tired of threatening phone calls, letters, and talking to collectors, filing for Chapter 11 bankruptcy can be a good choice. That said, both Chapter 7 and Chapter 13 bankruptcies also lead to automatic stays. Speak with your attorney to learn more about each option so you can better decide on the right one for your needs.
Those Who Don’t to Start Over From Scratch
Chapter 7 bankruptcy is a way to discharge your business’s debts rather than repay them. This might sound like the best option, but that debt discharge comes at a price: you may have to close your doors and sell your business’s assets to settle those debts. That means you won’t be able to continue earning money and may have to fire all of your trusted employees.
Since Chapter 11 bankruptcy doesn’t involve selling your assets to settle your debts, you’ll be able to keep your business running and won’t have to come up with a new business idea, secure funding to get your business off the ground, or focus on growth completely from scratch. You can instead focus on getting your business back into good shape.
Speak With a Wisconsin Business Bankruptcy Attorney
If you’re interested in filing for any type of bankruptcy, whether it’s Chapter 11, Chapter 7, or Chapter 13, the first thing you should do is speak with a Wisconsin business bankruptcy attorney. At Kerkman and Dunn, our team understands the unique challenges that businesses face when filing for bankruptcy and we’re committed to helping you choose the best solution for your situation. Contact us today to schedule a consultation.
