Complications in Filing for Chapter 11 Bankruptcy in Arkansas

There are several downsides to think about when considering Chapter 11 bankruptcy. Business owners across Arkansas should review the factors listed in the post when making their own decisions about moving forward with the Chapter 11 process.

As an Arkansas small business owner, juggling a mountain of debt, calls from creditors, the day-to-day operations, and the threat of losing your business can be taxing and overwhelming. Whether your business is a sole proprietorship or operates a partnership, LLC, corporation, or other business, you might be confused about bankruptcy options, including Chapter 11.

Filing for Chapter 11 bankruptcy may offer the financial relief you need, but it doesn’t come without complications.

Important Issues to Consider before Filing for Chapter 11 Bankruptcy in Arkansas

Chapter 11 bankruptcy is commonly known as “reorganization bankruptcy,” essentially allowing your company to reorganize its debts after the bankruptcy court’s automatic stay stops collection of the business’s outstanding debts. With this, however, it’s important to note:

  • The Chapter 11 bankruptcy process is longer, more complex, and costlier compared to Chapter 7 due to additional filing, administrative, and legal fees (associated with more legal work).
  • The court will only approve a proposed debt reorganization plan that is viable and if it reasonably expects that the business will return to profitability through the operation of the plan and its creditors will be paid more than they would receive in a liquidation.
  • The court may impose restrictions on the compensation of a debtor’s “insiders,” including officers, directors, and major shareholders.• If the debt reorganization plan is accepted, during execution, a debtor will need to seek the court’s approval to perform activities that are outside the ordinary course of business and are not contemplated by the plan. Selling major pieces of equipment or real estate typically requires court approval, but if the plan provides for the sale of the real estate, no separate court approval would be required. Depending on the business’s situation, different approaches may be feasible, so it’s essential to talk over potential bankruptcy routes with an experienced business bankruptcy attorney before moving forward.

This is certainly not an exhaustive list, and many Arkansas small business owners tend to consider whether Chapter 11 is really their best option. In any case, taking the time to create a thoughtful, well-structured debt repayment plan, working with creditors, and renegotiating other debts can outweigh the negatives. A knowledgeable Arkansas bankruptcy attorney can assist in identifying the right option for you and helping you take another step towards starting over financially.


Businesses owners across Arkansas have trusted Natural State Law, PLLC, with their bankruptcy questions and concerns for years. We offer compassionate and relevant guidance for business owners working through the complex and overwhelming bankruptcy process. Call (501) 916-2878 today to set up a free consultation.