The Pros and Cons of Chapter 11 Bankruptcy: What You Need to Know

Hello Debbie: Good insight this week. While Chapter 11 can be beneficial to many companies, it also has several cons to consider. Chapter 11 bankruptcy can be both expensive and lengthy. Debtors seeking to reorganize under chapter 11 must file voluminous and detailed documents with the bankruptcy court listing substantial financial information. These documents are public record and are available to anyone who reviews the court files. Closely related to the loss of privacy issue is the requirement that debtors maintain, and report detailed financial records. The nature of the records that need to be maintained and reported varies based on the nature of the debtor. Debtors seeking to reorganize under chapter 11 must show a profitable operation when their debts and obligations are reorganized. Chapter 11 is an extremely complex process. Understandably, the process is not cheap. But for most debtors, a chapter 11 reorganization is a once-in-a-lifetime process. The process should be carefully evaluated, planned and executed. Taking the time to create a thoughtful, well-structured plan to repay debts, work with creditors and renegotiate other debts can outweigh the negatives. Dollarhide, M. (2022, October 08). Chapter 11 bankruptcy: What's involved, Pros & cons of filing. Retrieved February 5, 2023, from https://www.investopedia.com/terms/c/chapter11.asp