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Miami Bankruptcy & Criminal Attorney / Blog / Bankruptcy / The Ins and Outs of a Chapter 11 Bankruptcy

The Ins and Outs of a Chapter 11 Bankruptcy

News outlets are bustling with talk of bankruptcy as rapper and entrepreneur 50 Cent filed for protection from his creditors in a Connecticut court. The 40-year-old entertainer’s estimated worth previously hit more than $100 million following the sale of his water company to Coca-Cola in 2007. Since that time, he continues to make music, star in feature films and produce a television show. It’s no wonder that the public is wondering why this successful businessman is filing for bankruptcy.

What is Chapter 11?

According to reports, 50 Cent filed for Chapter 11 protection. This type of bankruptcy is generally utilized by businesses that are in the process of restructuring and individuals who qualify. General Motors, K-Mart and United Airlines all previously filed for Chapter 11 bankruptcy. This particular code allows debtors to reorganize their debts through a court approved plan that modifies payment structures and decreases debt. Another characteristic of Chapter 11 bankruptcy is the ability for a business to sell off some of its assets for the purpose of repaying debt or reducing the size of the business.

Small Businesses

Under Chapter 11, small businesses can take steps to speed up the bankruptcy process, which saves money on attorney’s fees and additional expenses. In order to qualify as a small business, the debtor must be an entity:

  • Engaged in some type of commercial activity; and
  • That owes $2,490,925 or less in total debt claims.

If the filer is granted a small business classification, he receives some benefits, including the absence of a creditor’s committee. In a general Chapter 11 case, the court appoints a committee which represents the debtor’s unsecured creditors throughout the proceedings. If they deem necessary, committee members may retain attorneys or hire other parties to assist with their duties. All of this is done on the debtor’s dime, which can raise the cost of filing significantly. Not requiring this step can save the small business a substantial amount of money.

Another benefit for the small business is the disclosure statement exception. In regular Chapter 11 cases, the business must create a disclosure statement for consideration by the court. Once approved, the statement is provided to each creditor and parties with interest in the company. The process can prove challenging and expensive. In a small business Chapter 11 case, the court can choose to waive the disclosure statement requirement.

Greater Oversight

Though small businesses can benefit from Chapter 11 cases, they are also scrutinized more closely. The bankruptcy code mandates that the United States Trustee’s Office oversee small business filings with greater detail than general Chapter 11 cases. Filers must also submit additional reports and documents that are not required from larger businesses.


If individuals have secured debts (mortgages and liens) that add up to more than $1,149,525, or unsecured that debts add up to more than $383,175, they may also benefit from a Chapter 11 reorganization. This is particularly useful when the individuals have investment properties they are attempting to save.

Why did 50 Cent file for Chapter 11 bankruptcy? The rapper may be looking for additional time to restructure his business dealings and pay debts. As noted in a Tampa Bay Times article, his filing came a few days after a woman was awarded $5 million in damages against him in a lawsuit.

If you are deciding whether to file bankruptcy, contact Julia Kefalinos today for immediate assistance with your case. We serve clients in Miami, and are prepared to help you whenever you are ready.

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