Bankruptcy ✦ Chapter 11
Reorganize Under Court Protection. Keep Operating.
Chapter 11 lets a business, or an individual with debts too large for Chapter 13, restructure obligations while continuing to operate under the protection of the U.S. Bankruptcy Court for the District of Colorado. North Star Law Firm handles Chapter 11 and Subchapter V cases with an attorney-CPA who can build the projections the plan depends on.
Overview
What does Chapter 11 actually do?
Chapter 11 is the reorganization chapter. The debtor stays in control of the business as a debtor in possession, the automatic stay stops every creditor at once, and the debtor proposes a plan under 11 U.S.C. § 1123 that restructures debt: stretching secured loans, paying priority tax over five years, and paying unsecured creditors a percentage from future operations or a sale. Confirmation under § 1129 binds every creditor, including the ones who voted no, as long as the plan meets the Code’s tests. Colorado cases are heard in Denver, and the U.S. Trustee’s Region 19 office there supervises operating reports and fees.
- Automatic stay stops lawsuits, levies, setoffs, and lender enforcement at filing
- Business keeps operating as debtor in possession (§§ 1107, 1108)
- Leases and contracts assumed or rejected on the debtor’s terms (§ 365)
- Secured loans restructured; undersecured claims split into secured and unsecured parts (§ 506)
- Priority tax paid over up to five years (§ 1129(a)(9)(C))
- Plan binds dissenting creditors once confirmed (§ 1141)
Which Track
Traditional Chapter 11 or Subchapter V?
Since 2020 most small businesses no longer need a traditional Chapter 11. Subchapter V, added by the Small Business Reorganization Act, strips out the creditors’ committee, the disclosure statement, and the absolute priority rule, and puts a trustee in the case to facilitate a consensual plan. The trade-off is a debt ceiling. Here is how the two compare for a Colorado business:
| Feature | Traditional Chapter 11 | Subchapter V |
|---|---|---|
| Debt limit | None | $3,424,000 (Sept. 2026); pending bill would raise it to $7.5 million |
| Who can use it | Any business or individual | Business debtors with at least 50% business debt |
| Creditors’ committee | Usually appointed | None unless the court orders one |
| Disclosure statement | Required | Not required |
| Plan deadline | Exclusivity period, often extended | 90 days from filing |
| Owners keep equity over creditor objection | Only if creditors are paid in full or contribute new value | Yes, if the plan commits projected disposable income for 3 to 5 years |
| Trustee | None (debtor in possession) | Subchapter V trustee facilitates and monitors |
| Typical time to confirmation | 6 to 18 months | 4 to 6 months |
If your business fits under the Subchapter V ceiling, start on the Subchapter V page. If it doesn’t, or if you are an individual above the Chapter 13 caps, traditional Chapter 11 is the tool, and the analysis below applies.
Individuals
Chapter 11 for individuals who are over the Chapter 13 limits
Chapter 13 is capped at $526,700 of unsecured debt and $1,580,125 of secured debt. A Colorado physician with a practice guarantee, a real estate investor with several mortgages, or a business owner personally liable on SBA and merchant cash advance debt can be over those figures quickly. Individual Chapter 11 has no cap. Post-petition income becomes property of the estate under § 1115, the plan can run longer than five years, and the discharge generally arrives when plan payments are complete. It is more expensive and more involved than Chapter 13, but it is often the only chapter that saves a home with large equity or a business worth keeping.
The Attorney-CPA Difference
A plan of reorganization is a financial forecast with a judge attached.
Every Chapter 11 plan has to prove feasibility under § 1129(a)(11): the court must find the business can actually make the payments. That proof is a set of projections, and in a small case the debtor’s lawyer is usually the one building them. We build them the way a CPA would, from the general ledger up, and we defend them the way a lawyer would.
The tax claims in a Chapter 11 case are also where value hides. Priority taxes must be paid in full, but penalties are generally unsecured, older taxes are dischargeable, and an IRS or Colorado Department of Revenue proof of claim is frequently wrong. Reading it correctly can change the plan by six figures.
- Projections and feasibility analysis prepared in-house
- Monthly operating reports for the U.S. Trustee handled correctly from month one
- Tax claims classified, reviewed, and objected to when they are wrong
- Cash collateral and adequate protection budgets built from real numbers
- Candid advice when a sale, a wind-down, or Subchapter V is the better path
Questions & Answers
Chapter 11 questions, answered
Who files a traditional Chapter 11 instead of Subchapter V?
Businesses with more debt than the Subchapter V limit ($3,424,000 as of September 2026, with a bill to raise it to $7.5 million awaiting final action in Congress), businesses whose debt is mostly non-business debt, and individuals whose debts exceed the Chapter 13 caps but who need to reorganize rather than liquidate. If you fit Subchapter V, it is almost always the better track.
Does the business keep operating?
Yes. The debtor stays in possession and keeps running the business under 11 U.S.C. §§ 1107 and 1108, subject to court oversight and monthly operating reports to the U.S. Trustee’s Denver office. Ordinary-course transactions continue; anything outside the ordinary course needs court approval.
Can an individual file Chapter 11 in Colorado?
Yes. High-income individuals over the Chapter 13 limits, often physicians, real estate investors, and business owners with large guarantees, use individual Chapter 11 to restructure. The plan can run longer than five years, and post-petition earnings are part of the estate under § 1115.
How long does Chapter 11 take?
A traditional case commonly runs six to eighteen months from filing to confirmation, longer if creditors contest the plan. Subchapter V cases are usually confirmed in four to six months. Costs scale with complexity, which is another reason to fit within Subchapter V whenever possible.
What happens to tax debt in Chapter 11?
Priority tax claims must be paid in full within five years of the petition date under § 1129(a)(9)(C), with interest, and the IRS and the Colorado Department of Revenue can object to a plan that shortchanges them. Older, dischargeable taxes are general unsecured claims. Sorting those claims correctly, and challenging the ones that are wrong, is tax work as much as bankruptcy work.
Find out whether reorganization is realistic before you spend a dollar on it.
A free consultation with an attorney-CPA on whether Chapter 11, Subchapter V, a workout, or an orderly wind-down fits your business.