Function

• A Chapter 11 bankruptcy is designed to help businesses reorganize structurally and repay outstanding debts over time. Filing Chapter 11 allows you to continue your day-to-day business operations during the reorganization and repayment period.
  
  

Eligibility

• There are several criteria that must be met to determine your eligibility for filing Chapter 11. According to the U.S. Courts, small businesses may file as a corporation, partnership or sole proprietorship. Individuals filing for Chapter 11 must complete credit counseling at least 180 days before filing. As of 2010, small-business debtors engaged in commercial or business activities may have total secured and unsecured debts of no more than $2,190,000.
  
  

Process

• The Chapter 11 process is slightly different for small-business debtors. In Chapter 11 filings, a creditors' committee typically oversees certain aspects of the case. In a small-business filing, the debtor interacts primarily with a bankruptcy trustee and the creditors' committee is not required. The trustee evaluates your business plan and determines your viability to meet the terms of repayment. During the repayment period, you're required to update the trustee on the state of your business's profitability, file your taxes in a timely manner and provide updated cash flow statements.
  
  

Benefits

• In addition to potentially saving your business, other benefits are associated with filing Chapter 11 as a small-business debtor. Filing Chapter 11 enacts an automatic stay that prevents your creditors from seeking collection against you. This can be particularly helpful if you're facing a potential lawsuit. Chapter 11 filings for small-business debtors also proceed more quickly than corporate filings, which can take years to be resolved.
  
  

Considerations

• Before filing for Chapter 11, there are several things to consider. If you're filing as a sole proprietor or partnership, your personal assets may be seized and liquidated to repay your creditors. If your debts exceed the established limit, you may have to file Chapter 7 instead, in which case you will lose some or all of your business and personal assets.