Re: “Example, my business has $1M note due in 6 months but does not have $1M, but I do have $250K in excess income. So, I file for Chapter 11...”
No, you would not file for Chapter 11.
Chapter 11 is major surgery on a critically ill business.
If this was the first time you had ever struggled to make a payment, you would immediately look for other sources of financing, or attempt to sell some part of your equity.
Or, you would sit down with your current banker and do your best to change your payment schedule.
You do not pay lawyers to negotiate a settlement you could negotiate yourself.
If you filed a Chapter 11 case on your two examples, the judge would say exactly the same thing I said: “Why are you wasting the Court’s time if you have a realistic plan to make everyone whole?”
It only goes to Chapter 11 when there is no realistic plan - and everybody takes a financial haircut.
Total BS. It goes to Chapter 7 when there is no realistic plan.