Can Business Owners Retain Control of Their Companies in Chapter 11 Bankruptcy?

Posted on November 30, 2016 at 12:00pm by
The benefits of filing for bankruptcy after job loss.

Businesses experiencing extreme financial hardship may be reluctant to file for Chapter 11 bankruptcy. There are myths and misconceptions about bankruptcy that make this decision even more difficult.

Just because your business files for Chapter 11 bankruptcy does not mean it will cease to exist. It also does not mean you will be unable to make decisions for your company during the Chapter 11 process. Under 11 U.S.C. § 1101, business owners can maintain some control as “debtors in possession.”

A business owner remains a debtor in possession until a Chapter 11 reorganization plan is confirmed. However, a business owner is no longer considered a debtor in possession if the case is converted to a Chapter 7 bankruptcy, dismissed, or a trustee is appointed.

As a debtor in possession under Chapter 11 bankruptcy, you do maintain control over most operations and business decisions. There are some exceptions to this rule. An experienced bankruptcy attorney can help companies navigate the Chapter 11 process while continuing business operations.

Why Else Should a Business File for Chapter 11 Bankruptcy?

Chapter 11 bankruptcy can stop collection attempts and lawsuits against your business, reduce debts, improve cash flow and protect your employees. Repayment plans under a Chapter 11 bankruptcy can last for 10 years. The length of a Chapter 11 repayment plan can make it easier for businesses to pay back burdensome debts.

There are also no debt ceilings or income requirements to file for Chapter 11 bankruptcy (unlike Chapter 7). You can be a small company or a large corporation and still file.

The Kansas City bankruptcy attorneys at The Sader Law Firm can help businesses discover solutions for managing debts.