What is Chapter 11 Bankruptcy?
A Chapter 11 bankruptcy is intended for corporations and companies rather than individuals. If a Chapter 11 bankruptcy is right for your company, your company may continue operating as it repays some debts and settles others that have grown too large for your company to handle. Similar to Chapter 13, a Chapter 11 bankruptcy restructures the debtor allowing your company to keep its doors open. In the right circumstances, a Chapter 11 bankruptcy can be a win-win situation where your company survives and eventually thrives while the creditors receive at least a portion of the debt owed. Your company (and you as its representative) must carefully follow the instructions for filing a Chapter 11 bankruptcy and complete the process in its entirety. Since any bankruptcy filing is a detailed and complicated process, you will benefit by having a qualified bankruptcy lawyer by your side.
The Chapter 11 Bankruptcy Process
Before you file for Chapter 11 bankruptcy, you need to figure out which bankruptcy court covers filings in your company’s jurisdiction. If your business operates in more than one location, this can be an important and complicated decision since some states are more debtor friendly than others.
Your company has only 120 days to create a reorganization plan to file along with the bankruptcy petition. This plan should thoroughly explain modifications, how to maintain functionality of the business, and will include a proposal to pay back debt while thriving after the bankruptcy.
Your company must show that reorganization will work. The creditors will then evaluate your plan and decide whether you will go forward, or whether they will force a total bankruptcy on your company.
If your Chapter 11 bankruptcy is approved and there are no objections from any creditors, a bank trustee appointed by the court will decide which debts will be paid by your company and which debts will be settled. Your company then has the right to consolidate, remove itself from leases, and whatever else it takes to properly reorganize. Chapter 11 bankruptcy allows your company to adjust for better business while going through the bankruptcy process. Hopefully, your company is able to make a significant recovery in the end.
Get Help with Your Chapter 11 Bankruptcy
After court approval, the bank trustee will monitor your company’s planned progress over the course of three to five years while frequently reporting back to the court with updates. If the approved plan is followed, your company will have a second chance at success through the means of your Chapter 11 bankruptcy. The legal counsel of a bankruptcy lawyer is invaluable, especially when your company or corporation is at stake. In and out of court, legal assistance is highly recommended.