Restructuring? Put a business valuation professional on your team

Filing for bankruptcy doesn’t necessarily mean you close shop. Many distressed businesses decide to reorganize instead. This option provides a path for continued operations. Here’s how a business valuation professional can provide insight during this process — and help your business thrive going forward.

Recent trends

Continued economic uncertainty has caused many businesses to struggle financially. Recent data suggests bankruptcy activity is increasing, and restructuring is more common than liquidation in the current environment.

In April 2026, U.S. commercial Chapter 11 (reorganization) filings were up 42% from April 2025, according to Epiq Bankruptcy, a provider of bankruptcy statistics. Small business Subchapter V elections under Chapter 11 increased 46% from April 2025. Overall, commercial bankruptcy filings — including both Chapter 11 and Chapter 7 (liquidation) — were up 21% from the previous year.

These figures reflect only businesses involved in formal bankruptcy proceedings. Many others are involved in informal, out-of-court reorganizations. As restructuring activity accelerates, the need for credible valuation analyses becomes increasingly important for decision-making and stakeholder negotiations.

Close-up on Chapter 11

When a company files for Chapter 11, it retains its assets as a “debtor in possession.” Existing management generally remains in control of day-to-day operations as the debtor in possession, subject to court oversight. In certain situations — such as fraud or gross mismanagement — a trustee or chief restructuring officer may be appointed. The Chapter 11 process provides court-supervised protection from creditors while the company proposes and negotiates a reorganization plan.

Typically, a Chapter 11 bankruptcy proceeding protects business assets while restructuring:

• Priority tax debts,
• Secured debts,
• Unsecured debts, and
• Leases and contract debts.

The bankruptcy process starts with a petition to the bankruptcy court. A voluntary petition is filed by the debtor. Conversely, an involuntary petition is filed by creditors after certain conditions have been met. In either event, the business typically has about four months to develop a reorganization plan. However, if “just cause” for a delay can be shown, the court may grant a business up to 18 months after the petition filing to develop its plan. The goal is for the business to continue operating during the reorganization process and emerge from bankruptcy in better financial shape.

Historically, Chapter 11 was cost-prohibitive for many smaller businesses. Changes to bankruptcy law, enacted in 2019, provide greater access to protection with Subchapter V elections under Chapter 11. These filings, available only to small businesses that meet certain criteria, streamline the reorganization process. For example, they allow shorter timelines, reduced administrative burdens and more flexibility in negotiating with creditors than traditional Chapter 11 filings.

How a valuator can help

Companies contemplating Chapter 11 bankruptcy often seek the input of a business valuation professional as they determine the appropriate course of action. Examples of how valuators can help management include:

• Assessing the severity of the business’s financial crisis and mitigating it with cash budgets,
• Determining whether reorganization makes sense,
• Developing and evaluating reorganization plans (including financial projections and sensitivity analyses),
• Appraising assets (such as inventory, equipment and receivables),
• Divesting nonoperating assets and unprofitable segments, and
• Restructuring debts and loan covenants.

If Chapter 11 bankruptcy doesn’t make sense and a liquidation under Chapter 7 will be necessary, a valuator may serve as a financial advisor to a court-appointed receiver or trustee, helping facilitate the liquidation process. This includes winding down operations and paying out creditors in order of legal preference.

Timely insight, better outcomes

When facing financial distress, having the right information at the right time is critical. Bringing on a business valuation professional early can provide clarity, support negotiations, and help business owners evaluate their options and take action.

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