Chapter 11 Bankruptcy: Solutions for Small Businesses, as well as Big Corporations
A Business Filing for Chapter 11 bankruptcy protection implies that the company is on the verge of bankruptcy, but believes that it can once again become successful if it is given an opportunity to reorganize its assets, debts, and business affairs.
What should you do if you own or operate a business with mounting debts and your creditors have started to demand payments, which you are unable to pay? You can go into denial and let it all drag out, or you can consider negotiating arrangements with each creditor, but both of these options just delay the resolution of your financial problems with no respite in sight. If your business has mounting debts that you are unable to pay back, then Chapter 11 bankruptcy is a great option for you. It will allow you and your business to reorganize and restructure the debt and it will buy you time to save your business or manage an orderly liquidation.
Chapter 11 is also known as the “business reorganization” chapter of the Bankruptcy Code. Filing for bankruptcy relief under Chapter 11 allows your business to stay afloat under the court’s supervision and work out a payment plan with your creditors. The goal of a Chapter 11 case is for the business to continue operating and eventually become profitable. However, sometimes, complex businesses or individuals with large, complex estates use Chapter 11 to liquidate assets. Although the Chapter 11 reorganization process is complex and expensive, most companies, if given the choice, prefer Chapter 11 to other bankruptcy provisions such as Chapter 7 and Chapter 13, which cease company operations and lead to the total liquidation of assets to creditors. Filing for Chapter 11 gives companies one last opportunity to be successful.
While corporations are allowed to continue business operations under Chapter 11, the bankruptcy court retains control over significant business decisions. Corporations may also continue to trade company bonds and stocks throughout the bankruptcy process but are required to report the filings with the Securities and Exchange Commission within 15 days. While Chapter 11 can spare a company from declaring total bankruptcy, the company’s bondholders and shareholders are usually in for a rough ride. When a company files for Chapter 11 protection, its share value typically drops significantly as investors sell their positions. Once a Chapter 11 bankruptcy is filed, the federal court appoints one or more committees that are tasked with representing and working with creditors and shareholders of the corporation to develop a fair reorganization plan. The corporation, along with committee members, creates a reorganization plan that must be confirmed by the bankruptcy court and agreed upon by all creditors, bondholders, and stockholders. While this might sound complex, Chapter 11 is one of the easier methods of declaring bankruptcy for a business and could help preserve any future operations of the business declaring it.
The first step you should take is to hire a credible bankruptcy attorney with experience in handling Chapter 11 cases. The attorney will advise you regarding the feasibility of a successful Chapter 11 case, how it can solve your problems and what to expect during the process. Employing experienced counsel is imperative. A Chapter 11 proceeding is complicated and expensive. You will need expert legal assistance to go through the Chapter 11 process successfully. Counsel who has experience with complex Chapter 11 cases will save you time and money in the long run. Not only that, expert counsel will give you and your business the best chance at a successful reorganization.
At Dsouza & Strachan LawGroup, our team of experienced bankruptcy attorneys in Florida have considerable experience in dealing with complex Chapter 11 cases for many small businesses, LLCs and corporations. Call us today – (954.358.5911)