The goal of Chapter 11 bankruptcy is typically to restructure a business, streamline operational expenses and get a company out of the red. Eliminating redundant expenses, discharging certain debts and renegotiating other financial obligations can help struggling organizations overcome temporary hardships.
After a successful Chapter 11 bankruptcy, which can take years to complete, organizations may become profitable again. Unfortunately, some companies continue to struggle financially even after a Chapter 11 bankruptcy. In those cases, organizations may choose to file a second Chapter 11 bankruptcy, sometimes known as a Chapter 22 bankruptcy.
How a second bankruptcy filing helps
In some cases, new issues arise after the completion of a prior Chapter 11 bankruptcy. A manufacturer may need to recall products, which can devastate the company’s budget. A change in the market or a lawsuit against the company could leave a company struggling to cover costs.
In such cases, a second Chapter 11 bankruptcy could offer two potential forms of relief. Restructuring again can help an organization address increased operating expenses or economic changes. The business may be able to come out of the second filing stronger than it was after the first bankruptcy. Other times, the second Chapter 11 bankruptcy can be a way to wind down operations while maximizing the return on asset sales and minimizing the harm the filing causes to creditors.
Both options can offer benefits to those struggling to keep their companies profitable after a previous Chapter 11 bankruptcy. Working with a lawyer familiar with business bankruptcy can be beneficial for those facing financial hardship again after a previous Chapter 11 bankruptcy.