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How does Chapter 11 differ for a small business?

Chapter 11 bankruptcy is reserved for businesses. It is a restructuring of debt. While all sizes of businesses can file under the chapter, things may be different for a small business than for a larger one. One of the important parts of Chapter 11, according to the U.S. Courts, is the creditors’ committees. This committee is a group of the seven largest unsecured creditors. They investigate your business and finances and help to formulate the bankruptcy plan.

The tricky part when it comes to a small business is that there may not be enough creditors to form a committee. In this case, your business will be under more oversight from the U.S. trustee than cases that have the committee. The trustee will conduct the investigation that the committee would usually handle.

Another major change is that a small business case will usually move along faster than that of a larger company. The deadlines are different as well, which helps to speed things up. It is also harder for you to get any extensions, so you have to pay more attention to deadlines and ensure you are able to meet them.

Other than those two things, the rest of the case is generally the same for a small business as it is for a larger business. If you meet the requirements to be labeled as a small business, then you will have these two differences in how your case is handled, but you must meet the two criteria laid out in regards to your assets and the ability to form the creditors’ committee. This information is for education and is not legal advice.


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