How Does Bankruptcy Affect Small Business Owners?

When struggling with debt, filing for bankruptcy can be a boon for small business owners. Learn more about some of the advantages correlating with bankruptcy and small businesses.

Debt Relief

Bankruptcy provides a legal process to eliminate or restructure business debts, offering relief from overwhelming financial burdens.

Automatic Stay

After filing for bankruptcy, an automatic stay goes into effect, halting creditor actions like lawsuits, collection calls, and asset seizures. This provides breathing room to evaluate options.

Negotiating Leases and Contracts

Bankruptcy allows for the rejection, assumption, or renegotiation of leases and contracts, giving flexibility to adapt to changing circumstances.

Preserving Assets

Filing for bankruptcy can protect assets from being seized by creditors, giving the business a chance to recover and reestablish itself.

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Employee Protection

During restructuring, bankruptcy may help protect employee wages, benefits, and job stability.

Business Continuity

Chapter 11 bankruptcy enables businesses to continue operations while restructuring their debts. This can be essential for maintaining operations and preserving assets.


Chapter 11 enables the development of a repayment plan that can extend debt payments over time, making them more manageable and sustainable.

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