When you think of Chapter 11 bankruptcy, do you imagine huge, international corporations using it? While giant companies can use it, the popular idea that it is most often used by these big corporations is actually false. Most of the Chapter 11 filings that are put in every year come from small businesses.
Legally speaking, a small business in New York just has to have fewer than 500 people working there.
It is true that many small businesses don’t get to keep their Chapter 11 filings in the works for long. A lot of times, the court will ask to make a change, switching the filing over to a Chapter 7 bankruptcy instead.
The reasoning behind this is that Chapter 11 is for companies that look like they’ll start making a profit in the future—they just aren’t doing well at the moment. Chapter 7 is for companies that are not making and likely will not make any money, meaning assets need to be liquidated. While business owners may be optimistic and think that they can turn things around, the court may see the real picture and choose to liquidate.
A few key documents are needed to file for Chapter 11 as a small business, including the following:
— A copy of the company’s balance sheet that is dated closest to the date of the filing– A statement regarding the case-flow and a statement of operations– A copy of the last federal income tax return that was filed
If considering a filing, be sure you know about all of the legal steps you have to take. It’s crucial to do everything properly, especially if it’s important to be approved for Chapter 11, not Chapter 7. Visit our site to learn more.