Chapter 11 for Small Businesses and SVB Financial’s Bankruptcy

Chapter 11 for small businesses

SVB Financial-one of the country’s leading financial institutions-filed for Chapter 11 bankruptcy on March 17th, 2023. This filing came as a surprise and sparked significant fear about the threat of a looming recession. In truth, Chapter 11 bankruptcy can be an efficient strategy for businesses hoping to restructure their finances while continuing to operate. Filing Chapter 11 for small businesses may allow you to keep your business and create a plan to pay back debt.

Catch Up, Quick

In March of 2023, SVB Financial, the former head of Silicon Valley Bank, faced a crisis as many people and institutions withdrew their money due to worries about SVB’s financial stability and interest rate risks. This eventually led to the bank’s collapse and, on March 17th, the company announced in a press release that it filed for Chapter 11 bankruptcy.

Why SVB Financial Filed for Chapter 11

SVB Financial filed for Chapter 11 bankruptcy as a way to protect its remaining businesses within the group and restructure the business while generating revenue and continuing operations. By doing so, SVB Financial hopes to minimize the impact on its various businesses and preserve their value. Filing for Chapter 11 is a measure often taken by companies in financial distress and can be an effective way to reorganize debts and operations.

SVB Financial decided to file for Chapter 11 bankruptcy because Chapter 11 allows it to continue operating under the supervision of the court while it restructures its finances and operations. This means that SVB can continue to do business and generate revenue while it works to propose a plan of reorganization. Essentially, SVB Financial is utilizing Chapter 11 to ensure long-term success and sustainability and to use the Bankruptcy Code to restructure its debt. By taking this step, SVB is shielded from creditor action due to the “automatic stay” that happens once bankruptcy is filed, allowing it to emerge from bankruptcy stronger and more financially stable, with a greater focus on the future growth and success of its remaining businesses.

Chapter 11 for Small Businesses

Similar to what happened with SVB Financial Group, small businesses can also face financial difficulties and choose to file Chapter 11 bankruptcy as a prudent strategy to effectively reorganize. A small business may decide to file for Chapter 11 for various reasons, such as an unexpected increase in expenses, a downturn in the economy, or a sudden loss of customers or contracts. Filing for Chapter 11 for small businesses allows them to continue to operate under court supervision while they restructure their operations and propose a plan of reorganization to address their debt.

If you own a small business and wish to protect your business’s remaining assets from creditor collections, restructure debt and preserve value, Chapter 11 bankruptcy may be the most effective strategy.

Chapter 11 can be a challenging and stressful process, but with the right strategy and legal guidance from an experienced bankruptcy attorney, Chapter 11 for small businesses can allow your business to emerge from Chapter 11 stronger and more financially stable.

How Can Filing for Chapter 11 Help Me?

Chapter 11 bankruptcy can be a valuable tool for businesses that are facing financial difficulties, struggling to pay off their debts, or facing creditor collections. It can allow a business to restructure its finances and operations while continuing to operate and generate revenue. This can be especially beneficial for businesses that have valuable assets or a loyal customer base that they want to preserve.

However, the Chapter 11 process is complex and challenging, especially for small businesses with limited resources. Chapter 11 requires a significant amount of time and detailed accounting for both the business and its attorneys in order to develop and execute a successful reorganization plan. If you are considering filing Chapter 11 for your small business, consult with an experienced bankruptcy attorney to understand your options and develop a strategy that best suits your needs.

Is Chapter 11 Just For Businesses?

NO! Individuals can also file for Chapter 11 bankruptcy, which may be the most effective strategy if you have a significant amount of debt that cannot be restructured through other chapters of bankruptcy. It also offers more flexibility than Chapter 13 bankruptcy.

If you have unmanageable amounts of debt, including personal and business debts, and prefer a more flexible and customized approach to restructuring your finances, Chapter 11 may be your best option. Your Chapter 11 plan can include:

  • A sale of assets;
  • Negotiating more favorable terms with creditors;
  • Paying different classes of creditors a fraction of the amount owed;
  • Paying off debt over longer periods of time.

If you are considering Chapter 11 bankruptcy, it is crucial to consult with an experienced bankruptcy attorney to determine if Chapter 11 is the right option for your unique financial situation.

Bottom Line

Filing Chapter 11 for small businesses can help relieve financial stress by giving you the opportunity to restructure your debt and operations while minimizing the negative impact on your assets and customers. However, it is important to ensure you have a strong Chapter 11 strategy in place prior to filing.

Steiner Law Group is an experienced bankruptcy law firm in Maryland that has helped hundreds of Maryland residents and businesses discharge millions of dollars of debt.

If you have questions about Chapter 11 bankruptcy in Maryland or if you have unmanageable debt and don’t know what to do, contact Steiner Law Group today for a consultation or call us at (410) 670-7060.

Avatar of Eric Steiner, Esquire

About Eric Steiner, Esquire

Mr. Steiner graduated from the University of Michigan Law School in 2006. Since then, he has focused his practice on bankruptcy, real estate, commercial and consumer collections, including representing the third largest lender in the greater Baltimore area.