Filing Chapter 11 Bankruptcy
Many businesses have no option but to file for bankruptcy. The business cannot pay its creditors and is plunging further into debt. There are different types of bankruptcy that a business can file as per the US Bankruptcy Code. A Chapter 7 bankruptcy entails liquidating a debtor’s property and assets redirecting the funds to the creditors. This is usually in the case of an individual or sole proprietorships and the individual’s assets and properties are sold to pay creditors. Businesses that want to stay operational usually file a Chapter 11 bankruptcy. This is also known as a reorganization bankruptcy. Businesses usually retain possession and control of their assets under the supervision of the bankruptcy court.
If the business files for a Chapter 11 bankruptcy, the court suspends all foreclosures, judgments, collection activities and repossessions of property against the business. All debt that arose before the filing of the chapter 11 bankruptcy cannot be pursued by the creditors. This gives the business time to negotiate with the creditors via the bankruptcy court.
The business must then go about submitting a written disclosure statement to the bankruptcy court. This document must include detailed information about the company’s assets, liabilities and company operations and affairs. The statement must also include the proposed reorganization plan of how the company will handle the payment of funds owed to the creditors going forward.
The business’s creditors will be part of the proceedings. A creditor’s committee consisting of seven creditors who hold the largest unsecured claims against the business may investigate the business’s affairs, operations and conduct. The creditor’s committee will also participate in formulating the reorganization plan of how the business will pay the creditors. During a “section 341 meeting” the creditors can question the business under oath. The creditors can also file a motion to convert the Chapter 11 bankruptcy to a Chapter 7 bankruptcy which means liquidation or request that the case be dismissed.
After filing Chapter 11 bankruptcy, the business has 120 days to file the reorganization plan and 180 days to persuade creditors to accept it. The creditors can file their own reorganization plan if the business fails to meet these deadlines.
The bankruptcy court will confirm the feasibility and credibility of the plan after the proposed plan has been agreed upon by the company and its creditors. The confirmation of the plan by the bankruptcy court discharges the business from its old debts. The business is however bound by the reorganization plan to make payments to creditors as per the plan.
Filing Chapter 11 bankruptcy can be a very complex and expensive if you do not have the proper legal counsel. Our lawyers at ZocLaw.com have assisted many business owners with filing Chapter 11 bankruptcy. If you prefer to avoid bankruptcy, there are alternate debt relief options available. We can also assist with:
- Business Debt Settlement
- Merchant Cash Advance Debt Relief
- Small Business Debt
- Merchant Cash Advance Lawsuits
- Personal Guarantee
- Resolving a Confession of Judgment
- SBA Loan Default Help