Overview
Restructure. Continue. Recover.
Chapter 11 is the chapter of the bankruptcy code designed to keep a business operating while it works through its debts. Rather than liquidating assets, the debtor proposes a plan of reorganization that adjusts payment terms, restructures secured loans, and resolves unsecured liabilities. The result, when planned and executed well, is a business that exits bankruptcy meaningfully stronger than the day it filed.
Business Chapter 11 versus individual Chapter 11
Most Chapter 11 filings are by businesses such as corporations, LLCs, and partnerships, but the chapter is also available to individuals whose debt levels exceed the limits for Chapter 13. Subchapter V, added by the Small Business Reorganization Act, provides a streamlined version for qualifying small businesses with reduced cost and faster timelines. The firm advises on which path is appropriate during the initial assessment.
How the reorganization plan process works
- Filing the petition triggers the automatic stay, stopping foreclosures, lawsuits, and collection efforts.
- The debtor remains in possession of the business and continues operations, subject to court oversight.
- The firm prepares a disclosure statement and plan of reorganization detailing how each class of creditors will be treated.
- Creditors vote on the plan. Where the plan satisfies the code's confirmation standards, the court can confirm it even over the objection of a dissenting class through what is known as a cramdown.
- Once confirmed, the plan replaces the prior debt structure and the debtor proceeds under its terms.
Why experienced counsel is essential
Chapter 11 is the most complex chapter in the bankruptcy code. Cases involve secured creditors, unsecured creditors, equity holders, the United States Trustee, and often committees that must be negotiated with simultaneously. Mistakes are expensive and difficult to correct after the fact. Max Tarbox's board certification in business bankruptcy reflects the depth of preparation these cases require.
Who Chapter 11 is for
Chapter 11 is appropriate for operating businesses, real estate partnerships, agricultural enterprises that exceed Chapter 12 debt limits, and individuals whose debts are too large for Chapter 13. If the underlying business or income stream is fundamentally viable, Chapter 11 provides the legal framework to restructure obligations and preserve enterprise value.
