Have Chapter 11 Bankruptcies Increased?

Posted on May 21, 2018 at 12:00pm by
Why are more businesses filing for Chapter 11 bankruptcy?

Business Insider recently published an article on how Chapter 11 bankruptcy cases increased by 63 percent since last March. The article used bankruptcy filing data published by the American Bankruptcy Institute (ABI). According to the data, there were 770 Chapter 11 filings this past March. There have not been this many Chapter 11 cases filed in a single month since April 2011.

Why are so many Chapter 11 cases being filed? Part of the reason is because many businesses with physical locations, such as shopping mall retailers, are struggling to remain profitable. Brick-and-mortar businesses, as they are sometimes called, are experiencing severe financial difficulties. We wrote a recent blog on Toys ‘R Us that went into more detail on why these stores are struggling.

Why Should Businesses File for Chapter 11 Bankruptcy?

Businesses may benefit from Chapter 11 bankruptcy if they are struggling financially. In fact, Chapter 11 may give struggling businesses more options. Some of the benefits of Chapter 11 bankruptcy include:

  • Stopping creditor collection actions. Bankruptcy’s automatic stay will stop most collection actions from creditors.
  • Reducing business debts. Chapter 11 bankruptcy can help businesses reduce the debts they owe.
  • Maintaining control as a debtor in possession. A business may retain control of operations during Chapter 11 bankruptcy.
  • Restructuring debts and agreements. Chapter 11 bankruptcy allows businesses to reorganize their debts. Chapter 11 bankruptcy may allow a business to reject cumbersome or nonprofitable lease agreements.
  • Establishing a repayment plan. Chapter 11 bankruptcies allow businesses to pay back debts over a period of up to 10 years.

Can My Business File for Chapter 11 Bankruptcy?

There is no income ceiling for filing Chapter 11 bankruptcy. Major corporations worth billions of dollars can and have filed for Chapter 11 bankruptcy. Small businesses can also file.

The Kansas City business bankruptcy attorneys at The Sader Law Firm can help you determine whether your business would benefit by filing for Chapter 11 bankruptcy. You can learn more about the benefits of Chapter 11 bankruptcy by reading our website and by speaking with one of our attorneys.

Tags: , ,