How Do I Make Sure Filing Under Chapter 11 is the Right Choice for My Business?

While reorganizing under Chapter 11 can be a viable path forward for financially struggling businesses, it isn’t the right choice in all scenarios. When contemplating reorganization, business owners need to ensure they make informed, strategic decisions—whether that ultimately means filing under Chapter 11 or pursuing an alternative. With this in mind, how can you make sure filing under Chapter 11 is the right choice for your business? Here are some key considerations from an experienced Miami business bankruptcy attorney at Edelboim Lieberman:

5 Key Considerations for Deciding Whether to Reorganize Under Chapter 11

As a business owner who is contemplating a Chapter 11 bankruptcy filing, you have a lot to consider. Along with the potential benefits of filing under Chapter 11 (and the potential risks of waiting too long to make a decision), this includes the legal and financial practicalities of navigating the formal reorganization process. To make an informed decision about whether to move forward, you will need to carefully consider questions such as:

1. Are You Prepared to Meet the Requirements for Pursuing Reorganization?

There are several substantive and procedural requirements for pursuing a Chapter 11 reorganization. While business owners can—and should—rely on their bankruptcy counsel to guide them through the process of preparing and filing their bankruptcy petitions and negotiating their reorganization plans, business owners must be prepared to play an active role at each stage along the way. If you aren’t prepared (or your team isn’t prepared) to do what is required, filing could prove to be a waste of time and money.

2. Will Reorganizing Under Chapter 11 Allow You to Achieve Your Business Goals?

While filing under Chapter 11 affords a variety of benefits to struggling businesses generally, it will be important to assess whether reorganizing your business’s debts will allow you to achieve your business goals. Fundamentally, the underlying purpose of a Chapter 11 filing is to provide the financial stability needed to pursue a sustainable path toward long-term growth. If this isn’t what you have in mind, then you may be better off pursuing one of the various alternatives that are available.

3. Will You Be Able to Make a Reorganization Plan Work While Building Toward Profitability?

Businesses that reorganize their debts under Chapter 11 must be able to meet their reorganized debt obligations on an ongoing basis—and do so while building toward profitability. Missing payments can lead to collection actions, and this can effectively undo the benefits of going through the Chapter 11 process.

On the same token, if reorganizing doesn’t put a business in a position to achieve profitability going forward, it could face similar financial issues in the future. If this happens, the business may need to seek relief under the U.S. Bankruptcy Code (or through other means) again.  

4. Have You Thoroughly Considered the Potential Drawbacks (and Risks)?

While reorganizing under Chapter 11 can offer several financial benefits, it can also involve drawbacks. In some cases, filing under Chapter 11 can present risks as well—particularly when business owners have not made an informed decision about filing. For example, going through the reorganization process can trigger restrictions on borrowing and certain other financial transactions, and creditors can seek exceptions to the automatic stay in some circumstances.

5. Have You Thoroughly Considered the Alternatives?

Finally, whenever you are considering reorganization under Chapter 11, it is important to evaluate the alternatives. Putting all the options on the table is the only way to ensure you make an informed decision. While liquidating under Chapter 7 may be a reasonable alternative in some cases, here, we’re primarily talking about alternatives that also provide a path forward while maintaining the business’s viability as a going concern.

Which Type of Chapter 11 Reorganization Should Your Business Pursue?

If you decide that reorganizing your business’s debts under Chapter 11 is the best option under the circumstances at hand, then one of the next decisions you will need to make is which type of Chapter 11 reorganization to pursue. Here, the options include:

• Traditional Chapter 11 Bankruptcy – A traditional Chapter 11 bankruptcy involves filing a petition to initiate the process and then working with creditors, the court, and the bankruptcy trustee to establish a comprehensive reorganization plan.
• Pre–Packaged Chapter 11 Bankruptcy – A “pre-packaged” bankruptcy involves negotiating and securing approval of the business’s reorganization plan before filing a Chapter 11 petition in the U.S. Bankruptcy Court.
• Pre–Negotiated Chapter 11 Bankruptcy – A “pre-negotiated” bankruptcy is similar to a “pre-packaged” bankruptcy, but approval for the business’s reorganization plan is pursued post-filing.
• “Small Business Case” Chapter 11 Bankruptcy – A “small business case” is a specific type of filing available to qualifying businesses under the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA).
• Subchapter V Small Business Bankruptcy – A Subchapter V small business bankruptcy is a relatively new option that minimizes the procedural burdens of pursuing reorganization under Chapter 11 for eligible businesses.

The Subchapter V small business bankruptcy has become increasingly popular in recent years. While Subchapter V offers streamlined procedures that reduce the costs involved, it offers all of the same benefits of a traditional Chapter 11 filing—which is cost prohibitive for many small businesses. For 2026, businesses with less than $3,424,000 in noncontingent, liquidated secured and unsecured debts qualify as “small businesses” under Subchapter V.

Schedule a Free Call with a Miami Business Bankruptcy Attorney at Edelboim Lieberman

Our attorneys have extensive experience helping business owners make informed and strategic decisions about pursuing bankruptcy and navigate the bankruptcy process. If you need to make a decision about whether to file under Chapter 11, we invite you to get in touch. To schedule a free call with a Miami business bankruptcy attorney at Edelboim Lieberman, call us at 305-768-9909 or tell us how we can get in touch online today.