Chapter 11 - Business Bankruptcy

Chapter 11 is typically used to reorganize a business, which may be a corporation, sole proprietorship, or partnership. A corporation exists separate and apart from its owners, the stockholders. The Chapter 11 bankruptcy case of a corporation (corporation as debtor) does not put the personal assets of the stockholders at risk other than the value of their investment in the company’s stock.  A sole proprietorship (owner as debtor), on the other hand, does not have an identity separate and distinct from its owner(s). Accordingly, a bankruptcy case involving a sole proprietorship includes both the business and personal assets of the owners-debtors.  Like a corporation, a partnership exists separate and apart from its partners. In a partnership bankruptcy case (partnership as debtor), however, the partners’ personal assets may, in some cases, be used to pay creditors in the bankruptcy case or the partners, themselves, may be forced to file for bankruptcy protection.

A Chapter 11 reorganization is available to individuals as well.  However, due to the higher court fees, reporting requirements, and legal fees involved in a Chapter 11, it is seldom used by individuals.  Chapter 11 may provide individuals and businesses with an opportunity to reorganize their debts and make arrangements to pay all or a portion of the debts, or sell the business, while obtaining protection from creditors.  A Chapter 11 generally provides more flexibility than a Chapter 13 reorganization for individuals.

Chapter 11 has no limit on the amount of debt the debtor may have, unlike Chapter 13 which has a definite limit.  As a result, Chapter 11 is often a good choice for large corporations with a large amount of debt they are looking to restructure.  When a debtor files under Chapter 11, the company will typically remain in control of assets and will continue operating the business, although under the supervision of the court. A bankruptcy trustee may be appointed to oversee the company’s operations.  A Chapter 11 bankruptcy can effectively allow a company to remain in business and pay off its debts over time, making this an attractive option for large companies facing bankruptcy.

Chapter 11 is often far more complex than a Chapter 7 or Chapter 13 bankruptcy and is usually more expensive for a debtor to pursue. However, when handled properly by a qualified Florida bankruptcy lawyer, a Chapter 11 bankruptcy can be just what a company needs to get back on its feet.  

At The Bankruptcy Group of Florida, we can help. If you are considering bankruptcy and think that Chapter 11 may be the right option for you, Contact us today and discuss your situation with a lawyer who can answer your questions and address your concerns.