Can a Business File for Bankruptcy and Stay Open?

Filing for bankruptcy does not always mean a business has to close. Some forms of bankruptcy, such as Chapter 11, allow companies to restructure their debts while continuing to operate. This legal process allows businesses to reorganize, negotiate with creditors, and create a plan for financial recovery. At Ursulova Law Offices, P.C., we help businesses facing financial distress explore bankruptcy options that enable them to regain control while keeping their doors open.

How Chapter 11 Bankruptcy Keeps Businesses Running

Chapter 11 bankruptcy allows businesses to restructure debt and continue operations under a court-supervised repayment plan. Unlike Chapter 7, which typically results in liquidation, Chapter 11 allows companies to regain financial stability. Small and large corporations have successfully used this process to recover.

When a business files for Chapter 11, an automatic stay immediately halts creditor collection efforts, lawsuits, and foreclosure proceedings. The company then submits a reorganization plan outlining how debts will be repaid. If creditors and the court approve, the business follows the structured repayment plan while remaining open. A Brooklyn bankruptcy attorney can assist in preparing a strong reorganization plan that increases the likelihood of court approval. To learn more about the attorneys handling these cases, visit our attorney profiles.

Subchapter V: A Simplified Chapter 11 for Small Businesses

For small businesses with debts under $7.5 million, Subchapter V of Chapter 11 offers a streamlined, cost-effective alternative to traditional reorganization. This option simplifies repayment, eliminates creditor voting requirements, and reduces administrative costs.

A Brooklyn bankruptcy attorney can help business owners determine if Subchapter V is the best solution for financial recovery. For additional information about our firm’s approach, visit our About Us page.

Can a Business Stay Open After Filing for Chapter 7?

Unlike Chapter 11, Chapter 7 bankruptcy is primarily a liquidation process, meaning that most businesses filing under this chapter will close as assets are sold to repay creditors. However, sole proprietors may continue operations if their business assets qualify for exemptions under state or federal law. This option allows the owner to discharge personal debts while maintaining essential tools or equipment to keep the business running.

Sometimes, business owners may dissolve their current entity through Chapter 7 and start a new venture free from past liabilities. While this can provide a fresh financial start, it must be done carefully to avoid legal issues, such as fraudulent transfer claims. A bankruptcy lawyer in Brooklyn can help determine whether Chapter 7 is correct or another debt relief option would better preserve business operations.

Key Factors That Determine If a Business Can Continue Operating

Several factors influence whether a business can stay open after filing for bankruptcy:

• Type of Bankruptcy: Chapter 11 and Subchapter V allow businesses to restructure and remain operational, while Chapter 7 generally results in closure.
• Business Viability: The court evaluates whether the business has a realistic plan for future profitability.
• Creditor Cooperation: Successful restructuring often depends on negotiating new repayment terms with creditors.
• Debt Structure: A business’s type and amount of debt can affect its ability to qualify for reorganization.

A Brooklyn personal injury bankruptcy attorney can evaluate a business’s financial situation and recommend the best action. Explore our practice areas and how we handle business bankruptcy cases.

The Importance of Legal Representation in Business Bankruptcy

Bankruptcy requires detailed legal and financial planning. Business owners filing for bankruptcy must:

• Please choose the appropriate bankruptcy type based on your financial circumstances.
• Submit financial disclosures and other legal documents.
• Negotiate with creditors to develop a feasible repayment plan.
• Comply with court requirements and deadlines.

A Brooklyn bankruptcy attorney plays a key role in guiding business owners through this process, ensuring compliance with legal obligations while minimizing disruptions to operations.

Finding the Right Bankruptcy Path for Your Business

Bankruptcy can provide a structured path to financial recovery, but businesses need experienced legal guidance to achieve the best outcome. At Ursulova Law Offices, P.C., we assist business owners in evaluating their options through Chapter 11, Subchapter V, or another form of debt relief. Working with an attorney can help businesses stay open while addressing financial challenges and developing long-term stability strategies.
Our firm helps business owners manage bankruptcy while preserving their operations. Contact us today to schedule a consultation and discuss how we can help shape your business’s financial future.