Solyndra, a solar power company backed by President Obama, filed for Chapter 11 bankruptcy last week. No one (not even a company with presidential support) is immune to the hardships of the current economic depression. You may be wondering why Solyndra would file under Chapter 11? Why not file under Chapter 7 and erase all of their debt? However, Solyndra filed under Chapter 11 indicates that they plan to keep the business alive after reorganizing their debt.
So, what exactly is Chapter 11? Chapter 11 works much in the same way that Chapter 13 does. The major difference is that most people do not make enough money or own enough assets to qualify for Chapter 11. Generally only businesses can afford to file under Chapter 11. Chapter 11 is more complex than Chapter 13; thus, the court fees and attorney fees cost more than Chapter 13 fees do.
If you own a business, Chapter 11 may be a good option for you. Chapter 11 gives your business the option of restructuring your business debt and the chance to stay afloat, but it still comes with limitations. For example, if your business debts exceed its assets, there is the risk that your business may end up with nothing and end up being owned by your creditors. Furthermore, your reorganization plan must be heard and approved by the bankruptcy court. Therefore, it is imperative that you consult an attorney whose expertise can guide you safely through bankruptcy.