Sometimes a business in Virginia falls on hard financial times. Even if a business slashes its budget it could find that it simply isn't making enough of a profit to meet all its liabilities. When this happens, the business may want to file for Chapter 11 bankruptcy. Any type of business, whether it is a corporation, a sole proprietorship or other type of business entity can pursue a Chapter 11 filing.
Chapter 11 bankruptcy is a process in which the business is reorganized in a way that allows it to pay back its debts while continuing to operate. In general, Chapter 11 is useful for businesses whose value is greater than its liabilities, and thus it would lose goodwill if it were to be liquidated. In a Chapter 11 bankruptcy, the business is overseen by a trustee.
The Chapter 11 process begins with the filing of a petition that includes the business's plan for reorganization. The business will need to provide a disclosure statement. An automatic stay will be issued that stops creditors from collecting on the business's debts. This gives the business the opportunity to negotiate its financial issues. Sometimes businesses resume normal operations after the Chapter 11 bankruptcy process, but sometimes the business is eventually sold.
Chapter 11 bankruptcy is a complex area of business law. It can be very useful for businesses struggling to stay afloat, but it should not be entered into lightly. Businesses wishing to reorganize will want to make sure they understand the legal requirements for doing so, before making any decisions that could affect the viability of the company for years to come.