Small Business Debt Relief

Imagine No Debt

Chapter 11 bankruptcy is part of the United States Bankruptcy Code and allows a debtor to restructure their finances through a reorganization plan approved by the bankruptcy court. By modifying payment terms and reducing obligations, a Chapter 11 plan can help you balance your income and expenses, regain profitability, and continue running your business. Under a Chapter 11, you can also sell some or all of your assets and downsize the business as needed, or pay down claims you owe.
Can Chapter 11 Bankruptcy Help You Get Debt Relief?

If your small business is struggling with debt, bankruptcy may provide some relief. Whether it can help depends on a number of factors, including:

  • The legal form of your business; is it a sole proprietorship, general partnership, corporation, or an LLC?
  • Are you personally liable for business debts?
  • Do you want to close your business or keep it running?
  • How much and what type of debts do you have?

Special Provisions of Chapter 11 Bankruptcy

Under the Bankruptcy Code, a Chapter 11 filed by a small business debtor is considered to be a small business case. A small business debtor is a person who is engaged in business and owes no more than $2,490,925 in total claims. Here are some special procedures for small business Chapter 11 cases:

  • No Credit Committee: A credit committee is usually appointed to represent the interests of the creditors. A creditors committee can retain attorneys and other professionals at the expense of the debtor, which will raise the cost of the Chapter 11 reorganization. In a small business case, the bankruptcy court can order that no committee be appointed.
  • Additional Filing and Reporting Duties: Small businesses are subject to some reporting and filing requirements. A small business must attach its most recent balance sheet, operations statement, cash flow statement, and federal tax return to the bankruptcy petition.
  • Additional U.S. Trustee Oversight: The United States Trustee’s office is the agency that oversees bankruptcy cases for the Department of Justice. Under the law, small business cases are subject to more oversight than other Chapter 11 cases.
  • Plan Deadline: Usually, there is no deadline for filing a Chapter 11 plan unless it is set by the bankruptcy court. In the case of small business, the debtor has only 300 days to propose a Chapter 11 plan. The court has the option to extend the 300-day deadline, but only if the debtor proves that it will be able to obtain plan approval in a reasonable amount of time.
  • Longer Exclusive Period for Plan Proposal: Sometimes creditors file Chapter 11 plans. Plans filed by creditors usually provide for the liquidation or takeover of the debtor’s assets and business. Normally, the debtor has the exclusive right for 120 days after they file bankruptcy to propose a Chapter 11 plan. In small business cases, the period is extended to 180 days. The longer exclusive period reduces the risk to the debtor of having to litigate competing plans and possible losing business.
  • No Disclosure Statement: Normally in Chapter 11, the debtor has to prepare a disclosure statement, submit it to the bankruptcy court for approval, and provide copies to the creditors and other interested parties. In small business cases, the bankruptcy court can waive the disclosure statement requirement. This can greatly expedite the reorganization process and reduce legal costs and fees.

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1 Eagle Center, Suite #3A
O'Fallon, IL 62269
(618) 235-9800
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Granite City

1600 Pontoon Road, Suite B
Granite City, IL 62040
(618) 235-9800
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2721 S. Broadway (Rt. 37 South)
Salem, IL 62881
(618) 548-0083
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Mt. Vernon

4106 Broadway
Mt. Vernon, IL 62864
(618) 548-0083
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400 N. Keller Drive, Suite F
Effingham, IL 62401
(217) 342-0333
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