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Chapter 11 and the written disclosure

Entrepreneurs in Texas take a lot of risks. Chief amongst these risks are those that are financial in nature. A business typically has to rely on some sort of financing or investment to get off the ground, and expansion typically requires additional lending. In order to make good on these debts, a business has to have a strong bottom line. Yet, in many instances, businesses see shrinking markets, diminishing margins and difficulty making ends meet.

When businesses find themselves facing overwhelming debt, they may choose to seek debt relief through Chapter 11 bankruptcy. Through this type of bankruptcy, a business creates a reorganization plan that seeks to make the business profitable again. This may mean reducing costs and seeking new areas of revenue. If the plan is carried out as agreed to, then certain debts are discharged, thereby breathing a breath of fresh financial air into the business's life.

There are many requirements that must be met before a Chapter 11 bankruptcy can succeed. For example, a business must provide a written disclosure statement along with its reorganization plan. This disclosure statement must thoroughly account for all the business's assets, liabilities and business dealings. The purpose is to provide creditors with a detailed picture of the business's current standing so they can determine whether a proposed reorganization plan is sufficient. Creditors who are likely to receive less than the full value of what they are owed will vote on whether to approve the plan. In some small business cases, though, the disclosure statement isn't necessary if the reorganization plan contains all pertinent information.

Running a business can be stressful under any circumstances, but it can be especially grueling when financial challenges arise. The good news is that those businesses that feel like they are down and out can secure financial relief and a second life through Chapter 11 bankruptcy.

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