Chapter 11 Bankruptcy Can Allow Business Operations to Continue

There are times when cash flow becomes a problem for almost every Virginia business. Paying overhead expenses, meeting payroll, managing debt and maintaining appropriate inventory can be a challenge. While these may present challenges, they are necessary if the business is going to remain open. In some cases, managing the company’s debt becomes too much of a problem and it becomes necessary to take action such as filing for Chapter 11 bankruptcy.

If the goal is to ultimately save the business, then devising a plan to make it possible to pay creditors and still keep the business going can be crucial. With Chapter 11 bankruptcy, the debt is not discharged; it is restructured to allow the debts to be paid. By filing, the company itself is asking the courts to approve a reorganization plan submitted by the filer. However, it is also possible that creditors may ask for an involuntary filing.

Once the bankruptcy petition has been filed, a reorganization plan must be developed and submitted for approval. This plan addresses the various debts and classifications of debt that the business owes. Debts with a higher priority classification are paid before others. Generally, there is a four-month window in which to present the reorganization plan, but in some cases, this can be extended.

Under Chapter 11 bankruptcy, it can be possible for the business to continue normal operations while working out its financial difficulties. It can also offer the opportunity to restructure the business and its debts in a manner that allows it to become more profitable and thus able to withstand further economic challenges. For Virginia companies struggling to manage debt, this type of bankruptcy may be the appropriate option.