When does Chapter 11 bankruptcy make sense for a small business?

When your business is facing difficult financial struggles, it is important to understand what your options are. While some business owners in Massachusetts are able to turn things around without bankruptcy, others look to bankruptcy as a way to protect themselves and their business interests. But when you are considering bankruptcy because of a struggling business, is Chapter 11 always best?

The answer to that depends on the state of your business, among other things.

Chapter 11 bankruptcy is used to reorganize a business that is dealing with high debts. As part of the process, the business owner is responsible for creating a plan for guiding the company back toward profitability after the bankruptcy. This means that your business should have a chance of being profitable again if you choose to file for Chapter 11.

So, what happens if you think profitability is possible, but you are not entirely sure? In these situations, you can file for Chapter 11 and create a plan. If it becomes clear that the business cannot remain open after bankruptcy, your bankruptcy may be switched to Chapter 7.

Choosing which type of bankruptcy to file for when your small business is in financial trouble can be very stressful — especially when you are not familiar with your options. One way to help ensure you choose the right option for your business is to work with an experienced bankruptcy attorney. Bankruptcy attorneys have an intimate knowledge of the Bankruptcy Code and the different types of bankruptcies. The right attorney can assess your situation and help you choose the best option.

Source: FindLaw, “Chapter 11 Bankruptcy,” Accessed July 9, 2015