Chapter 11 For Small Businesses

Chapter 11 is typically used to reorganize a business, which may be a corporation, partnership or sole proprietorship, although individuals may file a Chapter 11, too. The debtor proposes a plan of reorganization that classifies and provides for treatment of different kinds of claims and interests, including secured and unsecured claims, taxes, unexpired leases and executory contracts. Creditors whose claims are impaired under the plan get to vote to accept or reject a plan.

A Small Business Bankruptcy Has Unique Considerations

The Bankruptcy Code treats a "small business case" somewhat differently from a regular bankruptcy case. A small business case is defined as a case with a "small business debtor."

Determination of whether a debtor is a "small business debtor" requires application of a two-part test. First, the debtor must be engaged in commercial or business activities (other than primarily owning or operating real property) with total non-contingent liquidated secured and unsecured debts of $2,190,000 or less. Second, the debtor's case must be one in which the U.S. trustee has not appointed a creditors' committee, or the court has determined the creditors' committee is insufficiently active and representative to provide oversight of the debtor.

In contrast to other Chapter 11 debtors, a small business debtor is subject to more reporting requirements and additional oversight by the U.S. trustee. Because certain filing deadlines are different and extensions are more difficult to obtain, a case designated as a small business case normally proceeds more quickly than other Chapter 11 cases.

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Contact us online or call 312-574-3327 to schedule your initial consultation. Our experienced attorneys will work directly with you in determining the right approach to your real estate in Chapter 11 bankruptcy.

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