From a business owner’s perspective, failure is not an option. Most business owners have typically faced their fair share of adversity before finding success and are high achievers who don’t take no for an answer. It’s these types of character traits that often drive business owners who encounter debt problems to refuse to give up and to instead explore financial restructuring options including filing for Chapter 11 bankruptcy.
By filing for Chapter 11 bankruptcy protection, a business owner is provided protections against creditors that may otherwise take hostile legal actions to recover unpaid debts. It also affords a business owner the time he or she needs to come up with a plan for how to reorganize a business to ensure it is more fiscally sound and able to remain viable.
Chapter 11 ultimately provides business owners with a pause button and time to assess areas of their business model and operations that are underperforming and financially draining. A business owner is then afforded the opportunity to devise a plan for how to reorganize which the bankruptcy court takes into consideration.
Once a reorganization plan is approved, the court helps assess and determine the debts and appropriate amounts that a business owner must work to repay. Additionally, the courts are likely to discharge certain debts completely, thereby absolving a business owner of any repayment responsibilities.
From the standpoints of both the courts and a business owner, Chapter 11 bankruptcy provides a second chance. The focus is on helping a business owner succeed by reorganizing a business’s structure and reducing and eliminating burdensome debts.
Source: FindLaw.com, “Chapter 11 and Other Reorganizations,” Sept. 3, 2015
U.S. Courts, “Process – Bankruptcy Basics,” Sept. 3, 2015