Chapter 11 business bankruptcy is on the rise right now, mostly due to the COVID-19 crisis and the economic hardships that it is causing for businesses around the world. What exactly is Chapter 11 bankruptcy?
What is Chapter 11 bankruptcy?
Named after the United States bankruptcy code 11, Chapter 11 bankruptcy is a type of bankruptcy that typically involves the reorganization of a debtor’s debts, assets and business affairs. Businesses usually file Chapter 11 when they need time to restructure debts. Chapter 11 bankruptcy is one of the more complex types of bankruptcy cases and requires an expensive bankruptcy proceeding, so businesses need to carefully consider Chapter 11 reorganization. That being said, there are a few Chapter 11 bankruptcy statistics you should know.
Chapter 11 statistics to know
Here are some Chapter 11 bankruptcy statistics that you should know during this crisis:
- Chapter 11 bankruptcy filings were up 26 percent in April. Total commercial chapter 11 filings increased 26 percent year-over-year in April 2020, up to 560 from 444 in April 2019. Financial hardships are continuing to increase around the country and across the world right now, since most people have been staying at home for the past few months and will continue to do so for the foreseeable future in order to help flatten the curve. Businesses are struggling during the quarantine, especially those businesses that typically rely on people being in person for services, like hair salons and restaurants.
- Chapter 11 bankruptcy filings increased 6 percent from March to April. Commercial Chapter 11 bankruptcy filings increased 6 percent month to month from 530 filings in March 2020 to 560 filings in April 2020. Again, these filings are likely increasing because of the financial struggles businesses are experiencing during the quarantine.
- States in the South and on the East Coast experienced the highest per capita filing rates. The five states with the highest per capita filing rates in April were Alabama, Tennessee, Mississippi, Georgia and Delaware. Alabama had a whopping 5.02 filings per 1,000 people in the state, while Tennessee had 4.44, Mississippi had 3.99, Georgia had 3.78 and Delaware had 3.52.
Luckily, bankruptcy attorneys like Van Horn Law Group are available to help you file Chapter 11 bankruptcy if that’s the route that you choose to take during the COVID-19 crisis. It can definitely be confusing to determine which bankruptcy filing is best for you, but Van Horn Law Group will help you figure out the best financial option for you.
Businesses that choose to file for Chapter 7 typically need to close their doors, while those that file for a Chapter 11 bankruptcy can typically remain open and simply discharge their debts. Chapter 7 bankruptcy means the liquidation of particular assets, forgiveness of assets and payments going first to secured creditors, while Chapter 11 business bankruptcy means restructuring debts to make repayment and forgiveness of debts only after repayment terms are satisfied.
If you want more information about filing for bankruptcy, contact Van Horn Law Group.