Square One: Is a Chapter 11 Bankruptcy Right for Your Business?

chapter 11While it sounds counter-intuitive, bankruptcy can save your business.


Retailers Neiman Marcus, the Guitar Center, and JCPenney filed for Chapter 11 bankruptcy in 2020. So did J.Crew, GNC, and Tailored Brands. Each of these business interests suffered financial losses that require more intervention than a management shake-up to regain their commercial footing.


As 2021 kicks off, reports suggest Chapter 11 is in the offing for many more businesses as the pandemic continues to impact the economy. AMC, Bed Bath & Beyond, Office Depot, Barnes & Noble, and others are weighing Chapter 11 as a strategy to stem bottom lines awash in red ink.


The pandemic has pushed businesses to the brink and beyond. Companies that were struggling prior to the arrival of COVID-19, as well as those turning a profit, saw doors closed during lockdown and in some cases, complete drop-off of customer traffic. As the drumbeat of business closures continues into 2021, considering Chapter 11 could be a smart strategic move to save your business and increase profitability in a market that will never quite be the same.


Our tax lawyers help business owners and operators optimize business choices to suit long-term goals. If your company is struggling, Chapter 11 may be a strong option for you. Consider these points:

  • Chapter 11 is a key tool for reorganizing your business to become more profitable while making changes to your business model that could be dragging your company closer to closure each day. The pandemic has shuttered stores but provided no relief on leases, so debt builds with no way to service it. Working with landlords, leases, and lenders is a process available to you through Chapter 11 bankruptcy.
  • While a Chapter 7 bankruptcy aims your company toward liquidation, Chapter 11 is designed to place your company into bankruptcy under the supervision of a bankruptcy trustee. You maintain control of the business and work with the trustee to save and restructure profitable aspects of your company. At the same time, unprofitable portions of the company—stores, long-term contracts, leases, or facilities—are reviewed for how they might be pared away to pay debt and leave your company more nimble going forward.
  • To qualify for Chapter 11, you will have to show your business is unable to ever pay debt as is or to carry liabilities that can never be matched by the assets currently owned by your company.


If considering bankruptcy, work with a reputable law firm to assess your situation and options. An experienced tax and bankruptcy attorney can help you avoid pitfalls and make choices to use the Bankruptcy Code to grow your company back into profitable business.


Skilled bankruptcy and criminal defense tax attorney help business owners

For business owners challenged by the pandemic, bankruptcy could be an option. The legal team at Robert J. Fedor, Esq, LLC, provides strong representation on matters of business bankruptcy, IRS audits, and tax controversy. From offices in Chicago and Cleveland, our tax lawyers serve clients domestically and abroad. Call us at 800-579-0997.


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