See Chapter 13 eligibility standards. The bankruptcy could then be converted to Chapter 7 or dismissed if bankruptcy protection is no longer needed. The court will probably condition dismissal of the case on payment to creditors of the sale proceeds. Bankruptcy reorganization in Chapter 11 requires significant time on the part of the owners and managers to comply with the requirements of the bankruptcy system, interface with counsel, and negotiate with creditors. A reorganization then can drain an already stressed organization of management's time to participate in bankruptcy proceedings and money since the legal expenses are significant.
Most reorganizations fail, usually for lack of a real plan to solve the problems.
Businesses that require little capital, have few assets, or are really just extensions of the owner's skills and personality are ones that it may not pay to reorganize. The owners may be better off liquidating the business, in or out of bankruptcy, and starting over in a fresh entity. This can be a complex issue and requires good professional advice to do correctly. Thoughts on finding a lawyer. When Chapter 7 is best A Chapter 7, whether for the individual or a corporation, may be the best choice when the business has no future, it has no substantial assets or qualities that cannot be reproduced after bankruptcy, or the debts are so overwhelming that restructuring them is not feasible.