In a Chapter 11 proceeding, you propose a reorganization/re-structuring of your established business when you can no longer pay your obligations as they come due, and thereby adjust the repayment, to creditors according to priorities established by the bankruptcy code. A chapter 11 filer seeks to establish new terms with governmental agencies, old lenders, creditors, suppliers, equipment lease holders, landlords, subcontractors, etc. This is often the best option for established business owners facing revenue problems. Proceeding under this section requires a well negotiated plan that must ultimately be confirmed by a bankruptcy judge, after hearings and examinations of the filer and the debts associated with them.
In 2005, Congress made certain base-line rules for who must file as a "small business debor" under the code. While encompassing a vast array of business, this rule seems especially applicable to many restauraunts and small construction companies. The financial limitations under Section 101 (51D) give the firt level analysis which is that the business have aggregate noncontinegent debts, on the petition date or order date, that do not exceed 2, 190,000.00. This does not include debts to affiliates or insiders. Therefore, this examination may require a rather sophisticated anyalysis of aggregate debt. From there, the rules regarding the United States Trustee and the number of creditors and committee must be examined. It has been suggested that the reporting rules associated with being a small business debtor are cumbersome, and that it may well be in the interest of all parties to proceed outside of the smal business section.
