Chapter 11 bankruptcy and implications for small businesses 

As a real estate owner maintaining proper cash flow and keeping margins in the black is one of the primary tenants of success. Navigating through challenging times requires strategic planning and decisive actions as well as a strong fundamental knowledge. In trying times commercial real estate owners have the options to file for bankruptcy under Chapter 7 Liquidation of assets, Chapter 11 allowing for reorganization of business and debts or Chapter 13 repayment plans for individuals. The optimum outcome would be to file for chapter 11 which allows the debtor to retain their property.

The current retail market has seen several retailers declare bankruptcy, business franchises such as Big Lots, Red lobster and Express have all filed for bankruptcy under Chapter 11. Considering recent statistical trends showing that since June of 2023 there has been 40267 bankruptcies filed a 7% increase, of these bankruptcies 2753 of them were commercial which represents an increase of 28% of these 987 were chapter 11 representing an increase of 70% and 309 were subchapter V for small businesses representing a 78% increase. All this data should be accompanied by the fact that about 90% of chapter 11 applications are refiled as chapter 7 which leads to asset liquidation. Becoming familiar with filing Chapter 11 may prove beneficial as it is becoming more accessible.

When filing under Chapter 11, as a small business there are two subsections one can file under:  Chapter 11 subsection V or Chapter 11 the small business case both of these filings allow a cheaper and more streamlined process. To file a small business case, the debtor must be engaged in commercial or business activities (other than primarily owning or operating a single piece of real property) with total secured and unsecured debts of $3,024,725 or less, not less than 50 percent of which arose from the commercial or business activities of the debtor.

To file a subchapter V case, the debtor must be engaged in commercial or business activities (other than primarily owning or operating a single piece of real property) with combined total secured and unsecured debts of $7,500,000 or less, not less than 50 percent of which arose from the commercial or business activities of the debtor. 

Mastering the art of commercial property requires a combination of market knowledge, negotiation skills, legal awareness and a strategic approach. By following the tips and insights shared in this guide, aspiring commercial property professionals can navigate the complexities of the industry with confidence and achieve success in their endeavors. Remember, staying informed, building relationships, and adapting to market trends are key factors in unlocking the full potential of commercial property sales.