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What are the advantages of Chapter 11 bankruptcy?

By most indications, the national economy is on the upswing. That should be good news for everyone, including businesses in New York. But, unfortunately, there are still many companies that have significant financial difficulties to face. For some, Chapter 11 bankruptcy could be used to workout some of those concerns.

So, what are some of the advantages of Chapter 11 bankruptcy? Well, just like consumer bankruptcy, Chapter 11 bankruptcy is primarily used by businesses to address mounting debt problems. And, unlike Chapter 7 bankruptcy, which businesses and consumers alike can use to liquidate assets, a company that pursues a Chapter 11 bankruptcy intends to stay in business - not shut down.

In the bankruptcy process, the company comes up with a business reorganization plan that includes a repayment plan for debt and perhaps a slimming down of business operations. With the right plan, a company can eliminate debt and address other financial challenges that can get the business back to profitability.

In a Chapter 11 bankruptcy, it is important to listen to creditor input on how to make the best plan for the business - a plan that can be successful. Creditors, after all, have a significant interest in keeping the company open for business in order to give the business an opportunity to repay debt. A business bankruptcy can be a savvy move for companies in New York that are facing financial problems but that have a plan to stay in business. Companies in this type of position should get the best information about their legal options.

Source: uscourts.gov, "Chapter 11 - Bankruptcy Basics," Accessed April 2, 2017

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