{"id":228854,"date":"2025-05-07T13:40:02","date_gmt":"2025-05-07T13:40:02","guid":{"rendered":"https:\/\/peraltafinancing.com\/business\/legal\/is-chapter-11-right-for-my-small-business-ernest-g-ianetti-esq\/"},"modified":"2025-05-07T13:40:02","modified_gmt":"2025-05-07T13:40:02","slug":"is-chapter-11-right-for-my-small-business-ernest-g-ianetti-esq","status":"publish","type":"post","link":"https:\/\/fivemor.com\/?p=228854","title":{"rendered":"Is Chapter 11 Right For My Small Business? \u2014 Ernest G. Ianetti, Esq."},"content":{"rendered":"


\n
<\/p>\n

\n

If your small business is drowning in debt, you can file for Chapter 7, 13, or 11 to get out from underwater and start fresh. To decide what chapter to use, you must determine whether a personal bankruptcy or business bankruptcy is right for you.<\/p>\n

The Personal or Business Bankruptcy Options<\/h3>\n

If you are personally responsible for your business debts, a personal bankruptcy under Chapter 7 or 13 is probably the best option. You are personally liable if your business is a sole proprietorship or a general partnership. Also, you are responsible if you gave a personal guarantee to secure the financial obligations of your business.<\/p>\n

If your business is a corporation, LLC, or joint venture, the company is responsible for its debts \u2013 not you.\u00a0 (However, there are exceptions; read our \u201cAnswers\u201d page for more information). \u00a0<\/p>\n

If you file a business bankruptcy, you\u2019ll do it on behalf of the business, and you\u2019ll use Chapter 7 or Chapter 11. Business entities are not eligible to file under Chapter 13.<\/p>\n

You may have to close your business if you file a Chapter 7 bankruptcy. Chapter 7 is a \u201cliquidation\u201d bankruptcy. In a liquidation proceeding, the trustee sells the assets of the company to pay its creditors.<\/p>\n

My Debts are Personal, Should I File Under 11, or 13?<\/h3>\n

Chapter 11 and Chapter 13 both offer businesses a way to keep their property by reorganizing. <\/p>\n

Chapter 11 is the more popular choice for businesses. Still, it can be the right choice for some individuals, especially high-net-worth individuals with personal debt above the Chapter 13 limit. The Chapter 13 debt limit is $1,257,850 for secured debt and $419,275 for unsecured debt.\u00a0 For most individuals, however, Chapter 13 is less expensive and more manageable.\u00a0 Therefore, individuals rarely file under Chapter 11.<\/p>\n

What is the Chapter 11 Plan of Reorganization? <\/h3>\n

The debtor\u2019s plan of reorganization is a vital part of the Chapter 11 case. The plan details how the debtor will pay back creditors and, ultimately, emerge from bankruptcy as a viable, more robust business. <\/p>\n

For 120 days after filing, the debtor has an exclusive right to file a plan of reorganization. The period may be extended for up to 18 months if the court finds good cause to do so. After that, the creditors or the case trustee, if one is appointed, can submit a competing plan.<\/p>\n

Crafting a Reorganization\u00a0 Plan?<\/h3>\n

The Chapter 11 plan of reorganization explains how the claims for each class of creditors will be treated. A typical plan categorizes creditors as:<\/p>\n