Business Bankruptcy & Corporate Restructuring
Fight for Your Business
For more than 50 years, Lakelaw’s attorneys have helped Chicago-area businesses restructure debt, resolve SBA and bank disputes, and find a path forward — whether through Chapter 11, Subchapter V, or smart alternatives to bankruptcy.
Your Business Is in Trouble
At Lakelaw, we know that one size does not fit all. If your business can be saved, we want to help you save it. If it can’t, we want to help you have a soft landing — personally and professionally — so that you can go on with your life and even establish a new venture. We have the experience, the relationships, and the track record to guide you through the options.
At Lakelaw, we understand the toll business problems take on you personally, so we are mindful about how your business issues may affect your personal finances as well.
Business financial distress is not a death sentence. It is a problem to be solved, and it often has more than one solution. The right strategy depends on the nature of your debts, the viability of your operations, your personal exposure, and your goals. Here are some of the tools we use to help businesses in crisis.
Chapter 11 Reorganization
Traditional Chapter 11
Chapter 11 is the bankruptcy remedy for business problems. Under Chapter 11, we formulate a plan for payment of some or all business debts over time. The plan is binding on all creditors as long as a majority in number and two-thirds in amount vote for it. The debtor remains in possession of its assets and continues to operate the business under court supervision.
Chapter 11 can also be used by individuals with substantial debts and irregular but significant income — for example, business owners who have personally guaranteed millions in business debt.
Chapter 11 at a Glance
Who it’s for: Businesses and individuals with substantial debts that need time and court protection to restructure.
Key advantage: The debtor stays in control as a “debtor in possession” and continues operations while negotiating a plan.
Our approach: Speed and skill. We file with a plan in mind, align friendly creditors, and build alliances to persuade secured lenders that reorganization beats liquidation.
Subchapter V: Small Business Reorganization
Subchapter V of Chapter 11
Enacted in 2020, Subchapter V was specifically designed to make Chapter 11 accessible to small businesses. It is faster, cheaper, and more streamlined than traditional Chapter 11 — the features that used to make reorganization cost-prohibitive for smaller companies have been stripped away.
Under Subchapter V, there is no creditors’ committee, no disclosure statement requirement, and no quarterly U.S. Trustee fees. The debtor has the exclusive right to propose a plan, and the court can confirm it without creditor consent if it is “fair and equitable” and devotes all projected disposable income to creditor repayment over three to five years. Equity holders can retain their interests without new capital contributions.
Small businesses with aggregate noncontingent, liquidated debts under the current statutory limit are eligible, provided at least 50% of those debts arise from commercial or business activities.
Why Subchapter V Changes the Game
No creditors’ committee — eliminates a major source of cost and delay in traditional Chapter 11.
No creditor consent required — the court can confirm the plan over creditor objections.
Owners keep their equity — no new capital contribution required, unlike the absolute priority rule in traditional Chapter 11.
Trustee facilitates, not controls — the Subchapter V trustee’s role is to help negotiate a consensus plan, not to take over the business.
Plan filed within 90 days — the compressed timeline keeps costs down and resolution swift.
SBA Loan Defense & Resolution
SBA & EIDL Loan Problems
If you are facing enforcement of an SBA loan — whether an original 7(a) loan, an EIDL loan, or a PPP loan — you may have significant defenses. SBA lenders must comply with Standard Operating Procedures, and failures in origination, documentation, or collateral management can undermine the enforceability of the loan or personal guarantee.
For EIDL and PPP loans specifically, we evaluate whether proper forgiveness procedures were followed, whether SBA administrative errors contributed to default, and whether the borrower had proper access to deferment programs.
Common SBA Defenses
Impairment of collateral: If the lender refused reasonable offers to purchase collateral or failed to liquidate in a commercially reasonable manner, the guarantor’s exposure may be reduced or eliminated.
Lender SOP violations: Failure to follow SBA Standard Operating Procedures can undermine loan enforceability.
Statute of limitations: The 6-year federal limitations period under § 2415 runs from default or acceleration — and the government sometimes waits too long.
Discharge in bankruptcy: SBA loans are generally dischargeable in Chapter 7. Any post-discharge collection attempt violates the § 524 injunction.
Alternatives to Bankruptcy
Bankruptcy is a powerful tool, but it is not the only tool. For some businesses, a non-bankruptcy solution is faster, cheaper, and more appropriate. Lakelaw has deep experience in all of these alternatives.
Assignment for the Benefit of Creditors
An ABC is a common-law alternative to Chapter 7 liquidation recognized in Illinois since 1839. The business assigns all assets to an assignee who acts as trustee, liquidates them (usually through an auction), and distributes proceeds pro rata to creditors who file claims. There is no court filing and no court supervision — making it faster and far less expensive than a bankruptcy liquidation.
A key advantage: the owner of the debtor company may organize a new venture with new capital to bid at the auction, potentially regaining control of the business and its assets. We address possible successor liability claims, but this concern can frequently be overcome.
Out-of-Court Workouts & Restructuring
Not every financial crisis requires a legal proceeding. We negotiate directly with banks, landlords, vendors, taxing authorities, and other creditors to restructure payment terms, reduce principal balances, release guarantees, and buy the time a business needs to stabilize. Out-of-court workouts preserve confidentiality, avoid the stigma and expense of a bankruptcy filing, and can be implemented immediately without court approval.
When a workout is combined with operational restructuring — reducing overhead, renegotiating leases, rightsizing staffing — it can produce results faster than any bankruptcy chapter.
Voluntary Liquidation Under State Law
Illinois law allows a corporation to wind up its affairs and liquidate without bankruptcy through Article 12 of the Business Corporation Act. The corporation closes, the officers and directors liquidate assets, and creditors receive a pro rata dividend on their claims. The fee is modest, and when handled efficiently, this is a far better alternative to Chapter 7 for most corporations.
Defending Your Business in Bankruptcy
Businesses don’t only file bankruptcy — they also get pulled into bankruptcy cases as defendants. If your company has received a preference demand or adversary proceeding complaint from a bankruptcy trustee, Lakelaw has extensive experience defending these actions. Common defenses include the ordinary course of business defense, the subsequent new value defense, and the contemporaneous exchange defense — and in many cases, these defenses dramatically reduce or eliminate exposure.
We also defend businesses against fraudulent transfer actions, trustee avoidance claims, and § 503(b) administrative expense disputes.
Every Business Is Different
The right strategy depends on the specifics of your situation — your debt structure, your personal guarantees, the viability of your operations, and your personal goals. For more than 50 years, Lakelaw’s attorneys have been solving these problems, and we’ve seen virtually every variation.
If your business is in trouble, talk to us. The initial consultation is free, it’s confidential, and it’s with a real lawyer — not a bot or an assistant. We’ll listen, we’ll assess, and we’ll give you an honest evaluation of your options.
If your business is facing financial crisis, you don’t have to face it alone. Lakelaw’s business bankruptcy attorneys have helped hundreds of companies find a path forward. Contact us today for a free, confidential consultation.