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How often can a business file for Chapter 11 bankruptcy?

On Behalf of | Oct 24, 2023 | BANKRUPTCY LAW - Chapter 11

If you are an entrepreneur, you probably understand that financial hardship can hit your business at any time. An ex-employee can sue you for wrongful dismissal and win a significant amount of money in damages. Or, your business can bear the brunt of an economic recession.

If your business is going through a tough time, financially speaking, you may consider filing Chapter 11 bankruptcy so you can restructure your debts and work your way back to solvency. But what if you’ve successfully filed for Chapter 11 bankruptcy before? Can you do it again?

Understanding Chapter 11 bankruptcy

Chapter 11 bankruptcy is designed to help businesses reorganize their debts so they can remain in operation while repaying their debts over time. And just like personal bankruptcy, a business can file for Chapter 11 bankruptcy multiple times.

However, there are instances when a time limit may apply when filing for this type of bankruptcy. For instance, if your previous petition was unsuccessful because you disobeyed a court order relating to the bankruptcy proceeding, then you may have to wait for 180 days before you can file again. Also, if you are looking to liquidate your business assets with another Chapter 11 bankruptcy, then you can only do so after eight years from your previous bankruptcy.

The main issue with Chapter 11 bankruptcy isn’t whether you can file multiple times. Rather, it’s about your eligibility to have your business’ debts discharged. Thus, if the debts in question are not dischargeable (like unpaid fines and taxes), then bankruptcy might not provide the relief you are looking for.

Chapter 11 Bankruptcy can be a welcome relief when your business has fallen on hard times. Whether you are filing for the first or the fourth time, understanding how Chapter 11 Bankruptcy works can help you protect your business interests while discharging your debts.