A core focus on businesses
built on experience and integrity

How does a Chapter 11 bankruptcy buy you time?

On Behalf of | Jun 28, 2022 | Business Bankruptcy

One of the nice things about a Chapter 11 bankruptcy is that it buys you time to save your business. Unlike some other kinds of bankruptcy, Chapter 11 bankruptcy is designed to help you keep your business open by giving you time to restructure it.

Chapter 11 bankruptcy immediately stops collections efforts. It helps you negotiate with creditors to resolve debts and to begin reorganizing your business in a way that will help you become more financially viable in the future.

The goal of a Chapter 11 bankruptcy is to stop collections as you focus on restructuring your company, so you can keep it open, continue to offer employment opportunities and bring in a profit.

How a Chapter 11 bankruptcy works

Chapter 11 bankruptcy starts when you file a petition for bankruptcy with the court. Once that petition is accepted, your creditors have to stop trying to collect debts from you. At the same time, you will be expected to disclose all your debts, assets, expenses and income to the court.

The automatic stay on collections activity isn’t foolproof, and there is a potential that the court could lift the stay for certain creditors. In most cases, however, that doesn’t happen and people are able to go through the Chapter 11 bankruptcy without debt collectors calling or reaching out to them.

Can your business stay open during the bankruptcy?

Yes, and that’s something unique about it. During the bankruptcy, you can keep your business open and running. This helps you bring in more compensation, which can then be used to pay back debts or run your business.

Even loans are a possibility during debtor-in-possession bankruptcies, so you may be able to get a new loan to help you subsidize your business and keep it afloat while you complete the bankruptcy process. That’s something to consider as you enter into bankruptcy, because bankruptcy itself may give you some new options that you did not have before.

If you’re ready to stop creditors from calling and want to buy time to reorganize your business, consider Chapter 11 bankruptcy as one of the options you could pursue.