Small Business Debtor
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Individuals may file
under this chapter but it is used primarily for business debt. (Sole
proprietor not included) A
Small Business Debtor is one whose debts exceeds the limits of
chapter 13 (unsecured $250,000 and secured $750,000) and has an aggregate non-contingent
secured and unsecured debts of $2,000,000.00 or less. (excluding one
who owns or operates real estate) If
qualified the debtor can be fast-tracked and treated differently
than a large corporation.
This chapter allows the
debtor (business) to continue normal business activities while reorganizing
(Like chapter 13) its
finances so that it may pay its employees, reduce obligations to its creditors
and produce a return for its stock holders. During this
chapter the debtor retains possession of assets and continues
operation. Plan may last up to 6 years.
The theory behind this chapter is
that an ongoing business is of greater value than if it is foreclosed on and
assets liquidated. After a successful chapter 11, the business can continue with
a restructured debt load and operate more efficiently than before and in doing
so preserve jobs and assets. Repayment
of debts is made from future profits, sale of some assets, mergers
Who Should Consider Chapter 11?
* Those whose unsecured business
debt exceeds $250,000 and secured debt of $750,000 and whose total debt does not
* You have little chance of meeting
your obligation under the current terms.
* Creditor's threatening legal
action against your company.
* You have a viable going concern
that would be ensured through debt restructuring.