When many people hear “Chapter 11,” they think of large corporations reorganizing massive debt. However, Chapter 11 is also a viable path for small businesses, sole proprietors, and individuals who need a structured way to reorganize finances while continuing operations. Although it is more complex and costly than other bankruptcy chapters, it can be a powerful tool when liquidation or a standard repayment plan is not feasible.

Why Choose Chapter 11 Bankruptcy?

Chapter 11 is fundamentally about reorganization, not liquidation. The debtor typically retains control of the business and assets—operating as a debtor in possession—and proposes a plan to restructure debt over time.

Small businesses or individuals often consider Chapter 11 when:

• They need to continue operating rather than shutting down.
• Their debt exceeds Chapter 13 limits.
• Their finances are too complex for Chapter 13.
• Business and personal finances are intertwined.
• They need to modify secured debt in ways not available in Chapter 7 or Chapter 13.
• They require a customized repayment structure.

Chapter 11 provides essential breathing room: it stabilizes operations and stops creditor pressure.

How Chapter 11 Works for Small Businesses

Small business owners—such as restaurants, contractors, retail shops, and clinics—turn to Chapter 11 when the business is viable but burdened by debt, rent, taxes, lawsuits, or lease disputes.

Key Features of Small Business Chapter 11

Debtor in Possession

Management stays in control and continues running the business, subject to oversight.

Ability to Restructure Obligations

Chapter 11 can restructure:

• Leases
• Secured loans
• Vendor debt
• Tax liabilities
• Personal guarantees

Automatic Stay

Immediately upon filing, Chapter 11 stops:

• Collections
• Lawsuits
• Foreclosures
• Garnishments

Chapter 11 for Individuals

Individuals file Chapter 11 when debt exceeds Chapter 13 limits or when finances are too complex for other chapters.

Common types of individual filers include:

• Real estate investors with multiple properties
• Business owners with personal guarantees
• Professionals with significant tax obligations
• High-income individuals needing a customized structure

Chapter 11 offers flexibility in restructuring secured loans, managing investment properties, and resolving business-related debt.

Important Considerations

While streamlined procedures exist for certain small debtors, Chapter 11 still includes:

• Strict deadlines
• Court oversight
• Extensive reporting requirements

It is not a quick or simple process—but it is a strategic tool for reorganizing and rebuilding.

The Chapter 11 Process

1. Filing the petition
2. Operating as a debtor in possession
3. Preparing required disclosures
4. Developing a reorganization plan
5. Negotiating with creditors
6. Court confirmation of the plan
7. Implementing the confirmed plan

Common Situations Where Chapter 11 Helps

Chapter 11 is often beneficial for:

• Restaurants or retail businesses with overdue rent
• Contractors facing judgments but maintaining active contracts
• Medical practices struggling with equipment loans
• Landlords needing to restructure property debt
• Individuals with business guarantees or complex financial obligations

Experience You Can Trust

For more than 30 years, I have represented individuals, small businesses, investors, and consumers in Chapter 11 and consumer bankruptcy cases. I understand the stress, uncertainty, and financial pressure that clients face when considering bankruptcy, and I take pride in offering practical, compassionate, and strategic guidance tailored to each situation.

Whether you are a business owner trying to save your company, an individual with complex finances, or someone simply looking for a path forward, you do not have to navigate these challenges alone.

Call Me With Your Questions

If you are considering Chapter 11 or want to better understand your options, I encourage you to call me directly. I am always happy to speak with prospective clients, answer your questions, and explain how these laws may apply to your situation. There is no substitute for personal guidance from an attorney who has handled Chapter 11 cases for decades.

Contact Rosenblatt Law anytime to schedule a consultation and take the next step toward financial stability and a fresh start.

Similar to a Chapter 11, you may need to prepare an outline that details how you intend to restructure your commercial debts through a court-approved plan. The court assigns a trustee to oversee your case and you may continue operations during the process, as noted by the American Bar Association.

How much debt may a business restructure?

Under the provisions of the SBRA, a business may file for Subchapter V with no more than $2.7 million in outstanding liabilities, as noted by CFO magazine. This amount reflects both secured and unsecured debts.

Secured debts generally include a mortgage, equipment and vehicles that may remain in the business’s possession during bankruptcy. Unsecured debts, however, may require a new payment arrangement approved by both the court and your business’s creditors.

What is the difference between the chapters?

Prior to the SBRA’s creation of Subchapter V, certain small businesses struggling with overwhelming debt loads did not have the resources to afford restructuring debts through a Chapter 11. The process generally requires the formation of a creditors’ committee, and the business filing the Chapter 11 petition must cover its costs.

If your business faces issues making it impossible to meet its liabilities, you may have the option of filing a Chapter 7 petition. This would require your company to liquidate its assets and use the proceeds to pay its creditors. By viewing Subchapter V as a hybrid of Chapters 7 and 11, you may have an additional option to help protect your business’s long-term viability.

1. The debtor can propose a plan that must be filed within 90 days after the bankruptcy petition is filed. This plan must be “fair and equitable” which means that the small business debtor must commit all of its “projected disposable income” or property of equivalent value to make payments under plan for a minimum of three years and a maximum of five years.

2. The debtor must demonstrate a “reasonable likelihood” that it will be able to make all payments under the proposed plan.

3. The debtor makes its payments to a Chapter 11 Trustee who distributes the payments in accordance with the debtor’s bankruptcy plan.

4. The Subchapter V of Chapter 11 process is substantially streamlined as there is no detailed disclosure statement as required in Chapter 11.

There are number of other provisions under Subchapter V that make this a very advantageous case for a debtor business that needs to get rid of a lot of debt in order to be profitable moving forward. This bankruptcy case moves much quicker and is designed for a business debtor that can be profitable moving forward without being burdened by substantial prior debt.

My law firm is very familiar with Subchapter V and the pros and cons of the small business debtor reorganization when compared to a regular Chapter 11 case. We look forward to hearing from businesses with questions regarding their financial circumstances and methods for resolution of business debt.

You may have heard of Chapter 7 and Chapter 11 bankruptcy but do not understand how these options differ. The differences are important because they can determine the future of your business.

Chapter 7 bankruptcy means liquidating your business

You may choose Chapter 7 bankruptcy if you believe there is no realistic hope of continuing to operate your business. In Chapter 7 bankruptcy, the court orders the sale of the assets of your business to satisfy your debts as far as possible. The court typically declares your remaining debts discharged without further payment.

While this form of bankruptcy discharges your debts, it leaves you without a business. Depending on the form of your business and personal agreements you may have signed in the past, you may also have to part with personal property.

Chapter 11 bankruptcy may mean a path forward for your business

If you believe that your business could be profitable again in the future, provided you could get some relief from your debts, Chapter 11 bankruptcy may be the answer. In Chapter 11 bankruptcy, you and your attorney work out a plan with the court for a repayment schedule. Your creditors may also petition the court and force you into bankruptcy if you are not current on your obligations.

Either way, the court may order a reduction of your debts, an extension of repayment terms, or other ways to provide relief from your debts. If the court is not satisfied that you can become profitable again, you may find yourself in Chapter 7 bankruptcy whether you want to be or not. Also, as with Chapter 7, protecting your personal assets in a Chapter 11 bankruptcy may require careful work.

Sometimes bankruptcy can be the only option for a business. Chapter 7 and Chapter 11 both offer ways to deal with otherwise unmanageable debt.

There are a variety of scenarios in which a small business could experience financial concerns, ranging anywhere from drops in revenue to overspending on operations. The first step in addressing these issues is to acknowledge their presence and identify the source. If operations are a concern, an owner could consider addressing any inefficient manufacturing processes and making the necessary adjustments.

Owners may also find it beneficial to keep track of business-related expenses, as unnecessary spending could bring about devastating consequences. Taking note of the level of success of certain products may also help an owner focus on more profitable areas and cut down on production on items that fail to produce the desired results. An owner could also consider searching out new ways promote products and services and attract customers, such as keeping prices competitive and advertising through social media.

Financial struggles can place a heavy burden on a small business owner. When similar issues arise, an owner might find it helpful to consult with a bankruptcy attorney for guidance in addressing debts and protecting a company. An attorney can help a client in Maryland gain a better understanding of all the available options, including reorganization, and subsequently assist in pursuing relief from debts through the necessary channels.

Source: msn.com, “8 Steps to Turning a Small Business Failure Around”, Mike Kappel, Accessed on May 23, 2018

According to reports, Nine West provides clients with access to a variety of brands of clothing and accessories. However, the company asserts that certain products have proved less profitable than others, and that substantial amounts of debt have left it in search of financial relief. By filing for Chapter 11 bankruptcy, the company is reportedly seeking to sell the rights to certain products and work back toward financial stability by focusing on its more successful products.

Along with seeking to sell certain product brands, the company also asserts that it is in the process of restructuring agreements with certain debtors. By filing for Chapter 11 bankruptcy, a company could seek to reorganize its finances and repay certain amounts of debt over a given period while remaining open for business. However, the company must first set forth its plan for reorganization for approval by the bankruptcy court before it can begin the process.

While financial reorganization could provide a company with the relief it needs to remain operational, it can also be a complex process. Business owners who wish to safeguard the future of their companies could consult with a bankruptcy attorney for guidance on the best course of action to take. An attorney in Maryland can provide a client with advice in making informed decisions and subsequently assist in pursuing relief from financial hardships through reorganization.

Source: daytondailynews.com, “Nine West files for bankruptcy”, Thomas Gnau, April 9, 2018

Much like many other mall-based stores, Claire’s Stores Inc. has reportedly begun to experience the financial challenges that come with the recent decline of consumer traffic. In addition to a decrease in revenue, the company is also struggling to deal with the nearly $2 billion of debt it obtained when it was taken over by another entity. Although the company says it initially sought to overcome these issues by forming business arrangements to sell its products at other retailers, it is reportedly preparing to seek relief through Chapter 11 bankruptcy.

It might not be all that uncommon for a business to experience monetary troubles from time to time, but in many cases, these struggles may only be temporary. However, if adjustments to business strategies fail to help a company through these difficult times, further assistance may be necessary. By filing for Chapter 11 bankruptcy, a company may be able to continue daily operations while repaying certain amounts of debt over time.

When a business struggles through extended periods of monetary problems, owners may find it beneficial to seek guidance on the potential advantages of financial reorganization. For advice on the available options, a business owner in Maryland could consult with an experienced bankruptcy attorney. An attorney can examine the situation and assist a client in pursuing the most favorable outcome possible concerning the future of his or her business.

Source: therealdeal.com, “Claire’s Stores plans Chapter 11 bankruptcy”, March 10, 2018

Whether for financial assistance in starting a new company, or for use in day-to-day operations, many owners carry business credit cards. While interest rates and reward programs on similar accounts may differ from a personal credit card, the result of falling behind on payments could be equally as devastating. Much like any other line of credit, owners may find that keeping current on payments is advisable, but in periods where profits decline, this goal could prove challenging.

In some cases, an owner may also allow employees to use business credit accounts on behalf of the company. While it may be necessary to authorize certain individuals to use these cards, setting clear rules on the types and amounts of purchases that are acceptable could help prevent a disaster. Substantial amounts of debt can have a substantial impact on the growth of a company, and for those who experience similar issues, seeking guidance could prove vital.

Business owners who experience the trials of dealing with overwhelming amounts of credit card debt may wish to reduce or eliminate these issues. With the potential weight debt can have on a company, an owner may find it beneficial to consult with an attorney for information on the available options for relief, such as reorganization. A bankruptcy attorney can assist a client in Maryland in making informed decisions regarding the financial future of his or her company.

Source: nav.com, “Don’t Let Your Credit Card Sabotage Your Business”, Jason Steele, Feb. 26, 2018

There are a multitude of circumstances that could leave a small business owner facing financial challenges. Without the presence of corporate backing, periods of low profit can prove to be exceedingly challenging, potentially prompting an owner to seek assistance through additional lines of credit, which may only be a temporary solution. However, while these periods are a significant concern for many business owners, they might not be the only issues an owner will face.

Upon starting a new business, a person may wish to pour all his or her time and effort into growing it into a success. However, it could take years for a company to become established, and leaving everything else behind too early in the process could prove detrimental. Once a company begins bringing in a steady flow of income, an owner might wish to expand operations, but doing so could prove risky. If these new endeavors fail to produce the desired results, the fallout could be disastrous.

With the potential weight that substantial amounts of debt can have on a small business, owners who face such challenges may wish to protect their company by pursuing relief. By speaking with an attorney, an owner could obtain advice on the options available, such as reorganization through Chapter 11 bankruptcy. An attorney can provide a client in Maryland with assistance in pursuing relief from debts and protecting the longevity of his or her business.

Source: entrepreneur.com, “Dealing with Debt as an Entrepreneur”, Mark J. Kohler, Accessed on Jan. 31, 2018

Competing with online stores can be challenging, and this has led many retail businesses to experience ups and downs in sales over time. While a business may seek to overcome these challenges by implementing new strategies, these might not always prove effective, and the cost involved may only further financial struggles. Even companies that continue to bring in profits on product sales can struggle to keep up with financial obligations.

While owners may wish to hold off on seeking relief until it is the only path available, doing so could prove detrimental. As sales decline and debts increase, owners might find it in their best interests to pursue relief as soon as possible to prevent the situation from growing out of control. By reorganizing finances through Chapter 11 bankruptcy, a company may be able to achieve new levels of success in the future.

When a business experienced prolonged periods of monetary struggle, owners may wish to protect the future of their companies by pursuing relief. When facing similar issues, an owner could consult a bankruptcy attorney for advice on how best to proceed. An attorney in Maryland can evaluate the financial standings of the company and assist a client in pursuing relief through reorganization.

Source: USA Today, “Why retailers are filing for bankruptcy when they aren’t yet broke”, Nathan Bomey, Jan. 3, 2018