Restructuring a Business or Filing a Business Bankruptcy: A Practical Checklist

Bankruptcy > Business Bankruptcy and Restructuring | Published 26 March 2026 - Updated 15 July 2026 | UpLaw - uplaw.us

One number governs everything here: how many weeks of cash remain. Work these sections in order, and work the first one today.

Items marked ⚠ are the ones where the natural instinct destroys options.

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Section 1 — Build the forecast

☐ Build a thirteen-week cash forecast. ⭐ Not a budget or a projection — a week-by-week schedule of cash in and cash out, with the actual dates money moves. Almost no distressed business has one, and no useful decision can be made without it. ☐ Beginning cash by account, with restricted balances flagged. ☐ Weekly receipts by customer, with realistic collection timing rather than terms. ☐ Payroll dates and amounts, including employer taxes. ☐ Rent, debt service, insurance, and utilities by due date. ☐ Critical vendor payments needed to keep revenue flowing. ☐ Identify the week the forecast goes negative. ⭐ That date is the deadline for every decision below. ☐ Update it weekly. A stale forecast is worse than none.

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Section 2 — Triage obligations

☐ Trust fund taxes — pay them, first, always. ⚠ Withheld payroll taxes are not the company's money, and responsible-person liability under 26 U.S.C. § 6672 is personal and survives every bankruptcy. ☐ Employee wages — nonpayment creates personal liability for officers in several states and ends the business immediately. See wage and hour law. ☐ Employee benefit contributions — withheld amounts are plan assets, not company funds; exposure runs under 29 U.S.C. § 1104 and 29 U.S.C. § 1109. ☐ Secured debt — list each lender, each collateral package, and whether any lien appears unperfected. ☐ Critical vendors — the ones without whom revenue stops. ☐ Everyone else, including the most persistent callers. ☐ ⚠ Do not pay the loudest creditor. Payments on old debt within ninety days are recoverable under 11 U.S.C. § 547, and paying them buys nothing. ☐ ⚠ Do not repay insider or owner loans. Insider preferences reach back a full year. ☐ ⚠ Do not distribute to owners while insolvent. Personal liability in most states, and an avoidable transfer under 11 U.S.C. § 548. ☐ ⚠ Do not incur obligations you cannot pay. Ordering goods with no ability to pay can create fraud exposure, not merely debt.

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Section 3 — Find the guarantees

☐ Read every loan document, lease, equipment agreement, and vendor contract for personal guarantees. ☐ Note cross-default and change-of-control provisions. ☐ Note any agreement purporting to terminate on a bankruptcy filing. ☐ ⚠ The automatic stay under 11 U.S.C. § 362 protects the debtor only. Guarantors may be sued the day after a filing. ☐ ⭐ Owners are routinely surprised by what they signed years ago. Do this before choosing any path — it frequently changes the answer.

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Section 4 — Choose the path

☐ Separate operating performance from capital structure. ⭐ A business with positive operating margin and unpayable debt is not a failed business; it is a solvent business with an insolvent balance sheet, and the whole system exists for that case.

Option	Stay?	Free-and-clear sale?	Owner control?	Cost	When it fits
Workout	No	No	⭐ Yes	Low	Few creditors, all cooperative
Assignment for benefit of creditors	No	⚠ Generally no	No	Low	Quick liquidation, buyer waiting
Receivership	No	Sometimes by statute	⚠ No	Moderate	Lender-driven
Orderly wind-down	No	No	Yes	Low	Assets exceed debts
Chapter 7	⭐ Yes	Trustee sells	⚠ No	Low	No viable business remains
Chapter 11	⭐ Yes	⭐ Yes	⭐ Yes	⚠ Very high	Large, complex, financeable
Small-business track	⭐ Yes	⭐ Yes	⭐ Yes	Moderate	⭐ Under the debt cap

☐ ⚠ A corporation gets no Chapter 7 discharge — 11 U.S.C. § 727 grants it only to individuals. The entity simply ends. ☐ Test small-business track eligibility against the current debt cap; it has changed repeatedly. ⭐ No committee, no disclosure statement, only the debtor may propose a plan, and the absolute priority rule does not bar equity retention. ☐ A sole proprietor is an individual — see consumer bankruptcy. ☐ Confirm eligibility under 11 U.S.C. § 109. ☐ Watch for an involuntary petition by creditors under 11 U.S.C. § 303.

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Section 5 — If you pursue a workout

☐ Open the lender conversation early, with a forecast and a plan rather than after a bounced payment. ☐ Identify every creditor whose consent is needed. ⚠ One holdout with a judgment can defeat the whole arrangement. ☐ Negotiate a standstill or forbearance with a defined period and defined termination triggers. ☐ Document everything in writing, including releases and any additional collateral. ☐ Address reporting covenants you can actually satisfy. ☐ ⭐ Leverage comes from a credible filing threat. Analyze the bankruptcy alternative before negotiating, or you are negotiating blind. ☐ See contracts.

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Section 6 — Before filing

☐ Negotiate cash collateral use with the secured lender. ⚠ 11 U.S.C. § 363 bars using a lender's cash collateral without consent or an order providing adequate protection under 11 U.S.C. § 361. A debtor without an agreement frequently cannot make week-one payroll. ☐ Line up debtor-in-possession financing if needed under 11 U.S.C. § 364. ⭐ Whoever funds the case usually controls it. ☐ Pay professional retainers while solvent enough to do so. ☐ Prepare first-day motions: pre-petition wages, customer programs, utilities, cash collateral, and critical vendors. ☐ Assemble schedules and statements — assets, liabilities, contracts, leases, insiders, and payments to insiders and creditors in the reach-back periods. ☐ Choose venue deliberately under 28 U.S.C. § 1408. ☐ Confirm insurance is current and will remain so. ☐ Prepare to open debtor-in-possession bank accounts on day one. ☐ ⚠ Confirm all payroll taxes are current before filing.

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Section 7 — Operating in the case

☐ Open new debtor-in-possession accounts; close the pre-petition accounts. ☐ Stay current on all post-petition taxes. ⚠ Post-petition tax delinquency is the fastest route to conversion under 11 U.S.C. § 1112. ☐ File monthly operating reports accurately and on time. ⭐ Nothing damages credibility faster than late or inconsistent reports, and judges read them. ☐ Obtain court approval for anything outside the ordinary course under 11 U.S.C. § 363 — sales, borrowing, settlements, insider transactions. ☐ ⚠ Do not pay pre-petition debt without an order, including the critical vendor everyone assumes must be paid. ☐ Pay professionals only through fee applications under 11 U.S.C. § 330. ☐ Share information with the creditors' committee appointed under 11 U.S.C. § 1102. ⭐ Goodwill is cheap; an adversarial committee is expensive, since its professionals are paid from the estate under 11 U.S.C. § 1103. ☐ Avoid grounds for a trustee under 11 U.S.C. § 1104 — fraud, dishonesty, or gross mismanagement displaces management. ☐ Budget the case. ⚠ Administrative expenses accrue monthly and must be paid in full to confirm.

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Section 8 — Contracts and leases

☐ Inventory every executory contract and unexpired lease with its economics. ☐ Decide assume, assign, or reject under 11 U.S.C. § 365. ☐ Compute cure costs before assuming; assumption requires paying arrears and providing adequate assurance. ☐ ⭐ Rejecting an above-market lease is frequently the single most valuable thing a filing accomplishes. The landlord holds a capped general unsecured claim. ☐ Consider assigning below-market leases as a source of value. ☐ ⚠ Calendar the deadline to assume or reject nonresidential real property leases — extendable once by right, thereafter only with landlord consent. ☐ Check whether applicable law bars assumption or assignment — personal services, certain licenses, and some franchise agreements. See franchising. ☐ Collective bargaining agreements may be rejected only under 11 U.S.C. § 1113; retiree benefits under 11 U.S.C. § 1114. See labor relations and unions. ☐ Note that rejecting a trademark license does not strip the licensee — Mission Product Holdings v. Tempnology.

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Section 9 — Exiting the case

By plan

☐ File within exclusivity under 11 U.S.C. § 1121; ⚠ missing it invites competing plans. ☐ Classify claims under 11 U.S.C. § 1122; ⚠ gerrymandering to manufacture an accepting class draws objections. ☐ Include required provisions under 11 U.S.C. § 1123; determine impairment under 11 U.S.C. § 1124. ☐ Prepare a disclosure statement with adequate information under 11 U.S.C. § 1125 — not required in the small-business track. ☐ Solicit and tabulate votes under 11 U.S.C. § 1126. ☐ Satisfy confirmation requirements under 11 U.S.C. § 1129: good faith, best interests, feasibility, priority payment, one accepting impaired class excluding insiders, and cramdown standards if needed. ☐ ⚠ The absolute priority rule bars equity retention over an unpaid dissenting impaired class in ordinary Chapter 11. ⭐ The small-business track is the workaround, and it is the main reason closely held companies use it. ☐ Confirmation binds and discharges under 11 U.S.C. § 1141. ☐ ⚠ Do not plan on releasing claims against officers without consent — Harrington v. Purdue Pharma L.P.. ☐ Expect insurers to object where affected — Truck Insurance Exchange v. Kaiser Gypsum Co..

By sale

☐ ⭐ Expect a sale, not a traditional reorganization. A sale under 11 U.S.C. § 363 delivers value faster and with less risk. ☐ Litigate bid procedures first — stalking horse protections, break-up fees, increments, and deadlines decide the outcome. ☐ Obtain a good-faith purchaser finding to protect against appellate reversal. ☐ Anticipate a sub rosa plan objection. ☐ Confirm regulatory consents for licenses and permits, which a sale order does not supply. ☐ ⚠ Successor liability is generally cut off but not for environmental obligations. See environmental contamination and cleanup. ☐ Check layoff notice obligations under 29 U.S.C. § 2101, 29 U.S.C. § 2102, and 29 U.S.C. § 2104.

By dismissal or conversion

☐ Under 11 U.S.C. § 1112. ☐ ⚠ A structured dismissal may not skip the priority scheme — Czyzewski v. Jevic Holding Corp..

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Section 10 — If you are a creditor

☐ Determine whether you are secured, and verify perfection immediately. ⚠ An unperfected lien is avoidable under 11 U.S.C. § 544. See secured transactions and liens. ☐ File a proof of claim by the bar date. ⚠ Absolute; a missed claim is generally gone. ☐ File an administrative expense request for post-petition value under 11 U.S.C. § 503, including goods received in the twenty days before filing. ☐ Make a reclamation demand within the statutory window after delivery. ☐ Seek committee membership under 11 U.S.C. § 1102. ☐ Move for stay relief where collateral deteriorates without adequate protection. ☐ Object to the plan on feasibility, best interests, or classification grounds. ☐ Watch the sale motion and the bid procedures. ☐ Set post-petition terms deliberately, and document every delivery.

Preference defense

☐ Pull three years of invoice and payment history the day you learn of a filing. ☐ Compute average days to pay before and during the ninety-day period. ☐ Compute subsequent new value shipped after each transfer. ☐ Identify any contemporaneous exchange for new value. ☐ ⚠ A creditor who tightened terms and demanded cash on delivery in the final months is exposed precisely because it reacted sensibly. ☐ ⭐ Engage early. Preference defendants who answer the demand with organized data settle for a fraction of it. ☐ Note fraudulent transfer exposure under 11 U.S.C. § 548 for transfers not supported by reasonably equivalent value.

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Section 11 — Personal exposure for owners and officers

☐ Trust fund taxes — 26 U.S.C. § 6672. Personal, and non-dischargeable in every bankruptcy. ☐ Personal guarantees — unaffected by the company's filing. ☐ Fiduciary duties shift on insolvency in many states, running to creditors rather than solely to shareholders. ☐ Unlawful distributions while insolvent create personal liability and avoidable transfers. ☐ Wage liability for officers in several states. ☐ Benefit plan fiduciary exposure under 29 U.S.C. § 1104 and 29 U.S.C. § 1109, enforceable under 29 U.S.C. § 1132. ☐ Insider preferences reach back a full year. ☐ Document board deliberations. ⭐ A board that considered alternatives, took advice, and recorded its reasoning is defensible; one with no minutes for the final six months is not. ☐ Review directors and officers coverage — exclusions, insolvency triggers, and whether to buy runoff before filing. ☐ Consider an individual filing where guarantees are substantial. See preparing and filing a consumer bankruptcy case. ☐ See owner disputes and business dissolution.

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Section 12 — Quick reference

Your situation	Do this first	Watch out for
Cash is tightening	Build the thirteen-week forecast	⭐ Do it at three months, not three weeks
Creditors are calling	Triage; pay trust fund taxes first	⚠ Do not pay the loudest
Considering options	Separate operations from capital structure	A viable business with bad debt
Under the debt cap	Test small-business track eligibility	⭐ Owners may keep equity
Preparing to file	Solve cash collateral	⚠ Week-one payroll
Bad lease	Plan the rejection	Frequently the whole economic case
In the case	File monthly reports on time	Credibility and conversion risk
Selling	Fight over bid procedures	They decide the outcome
Confirming	Model the absolute priority rule	Equity retention
A customer filed	Pull payment history immediately	⚠ Preference exposure
You guaranteed the debt	Identify every guaranty	⚠ The stay does not protect you
Winding down	Check director duties	Personal liability

☐ Print this and keep it with the forecast. ⭐ Everything in the Code is available to a company with three months of runway, and almost none of it to one with three weeks.

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Section 13 — Worked example: a filing that worked

Anders runs a commercial printing company with thirty-one employees. Revenue is $9.4 million and stable. The problem is a $2.8 million equipment loan taken in a growth year that did not arrive, a lease on a building twice the size the business now needs, and $640,000 owed to paper suppliers.

Week 1 — the forecast. He builds the thirteen-week schedule for the first time. It shows cash going negative in week nine. ⭐ That single number converts a vague dread into a deadline and makes every subsequent decision possible.

Week 1 — triage. Payroll taxes are current; he confirms it and keeps them that way. He stops making partial payments to the three suppliers who call most, recognizing that those payments buy nothing and create preference exposure.

Week 2 — the guarantees. He finds two: the equipment loan and the building lease. ⚠ Both survive any corporate filing. This changes his analysis, because a plan that leaves the equipment lender unpaid leaves him personally exposed.

Week 2 — the analysis. Operating margin is positive. The business is viable; the capital structure is not. Total debt is under the small-business track cap.

Week 3 — the lender. He meets the equipment lender with the forecast and a proposal. The lender declines to restructure but agrees, in principle, to consensual cash collateral use if a filing occurs — ⭐ which is the single most important thing he obtains all month.

Week 4 — professionals. He retains restructuring counsel and pays the retainer while the company can still do so.

Week 6 — filing. The petition is filed with a cash collateral stipulation attached and first-day motions for wages and utilities. Payroll clears on schedule.

Month 2 — the lease. He rejects the oversized building lease under 11 U.S.C. § 365 and relocates to a smaller facility. The landlord's damages claim is capped and general unsecured. ⭐ This one decision cuts annual fixed costs by $310,000 and is the economic core of the case.

Month 5 — the plan. Only he may propose it. The equipment lender is paid its collateral value over five years; the deficiency joins the unsecured class, which receives a percentage from operating cash flow. Because the small-business track applies, the absolute priority rule does not force him to surrender equity.

Month 9 — confirmation. The plan is confirmed. He remains the owner of a smaller, solvent company.

⭐ What made this work: a forecast built in week one rather than week nine, payroll taxes kept current, no preferential payments, cash collateral solved before filing, and a lease rejection that changed the cost structure permanently.

⚠ Compare the version where he waits until week eight. No cash for retainers, no lender conversation, no cash collateral agreement, payroll fails in the first week of the case, and the same company liquidates — with the guarantees still enforceable against him personally.

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Section 14 — Choosing professionals

☐ Restructuring counsel — ask how many Chapter 11 cases they have confirmed, and in which district. ☐ Financial advisor — ask whether they have testified on feasibility. ☐ Investment banker, if a sale is likely — ask for closed transactions in your size range. ☐ Chief restructuring officer, where lender confidence in management is low. ☐ Accountant who can produce monthly operating reports on time, every month. ☐ Claims agent in larger cases, frequently required above a claim threshold. ☐ Retention requires court approval under 11 U.S.C. § 327 and disinterestedness; terms may be fixed under 11 U.S.C. § 328. ☐ ⚠ Pay retainers before insolvency deepens. Debtor's counsel compensation is separately reviewable under 11 U.S.C. § 329. ☐ ⭐ Ask about the small-business track first. For a company under the debt cap, the cost difference is the difference between a viable process and an unaffordable one.

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Section 15 — Special situations

☐ Single-asset real estate — accelerated stay relief unless a plan is filed or interest payments begin quickly. ⚠ Filing merely to stop a foreclosure usually loses the property anyway, months later and after substantial fees. ☐ Healthcare businesses — patient records custodial duties, an ombudsman requirement, and licensure limits on any sale. ☐ Professional practices — licenses do not transfer freely, and client or patient file obligations shape every transaction. See professional licensing and occupational discipline. ☐ Construction — lien claims, retainage, bonding, and trust-fund statutes treating progress payments as held for subcontractors. See residential construction and home improvement. ☐ Retail and restaurants — gift card priority under 11 U.S.C. § 507, liquor licenses, and lease economics dominate. ☐ Franchises — assumption limits plus franchisor consent rights. See buying a system, not a business. ☐ Government contractors — anti-assignment rules and independent suspension or debarment exposure. ☐ Appeals run under 28 U.S.C. § 158. See civil appeals.

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Related Documents

• When a Business Cannot Pay: How Restructuring and Business Bankruptcy Actually Work
• Business Bankruptcy and Restructuring: A Comprehensive Guide to Chapter 11, Subchapter V, and Alternatives
• The Business Restructuring and Creditor Rights Toolkit