Owning a business can be very fulfilling, both on a financial and personal level. However, it comes with its own set of challenges and in today’s economy, many business owners are finding it difficult to keep their doors open. Unfortunately, these businesses are often left with no alternative but filing for bankruptcy for their business during times of financial hardship.
Chapter 11 bankruptcy may not be the right choice for every company, but it can certainly save some of them from complete financial ruin. Keep reading to discover a guide to chapter 11 bankruptcy, including pertinent information on who can file, as well as details about disclosure and discharge.
Chapter 11 Bankruptcy Information
Also known as reorganization bankruptcy, chapter 11 bankruptcy is most often used by larger businesses that are in financial trouble. Filing chapter 11 bankruptcy is not considered feasible for individual consumers, as the process is much too intricate and expensive to pursue. So the question remains,
what is chapter 11 bankruptcy?
In order to answer that question, one must understand the process this procedure entails, and why it becomes necessary for some businesses to take this course of action. To put it simply, chapter 11 bankruptcy is a practice that enables businesses to reorganize the debts they have incurred over the years.
Chapter 11 Bankruptcy Laws
Let’s first examine some of the common chapter 11 bankruptcy laws, including specific details about what types of companies can file, and other rules and regulations associated with the procedure. Filing for bankruptcy if you own a business requires your company to fall under the following categories:
- LLC (Limited Liability Company)
The Process of Chapter 11 Bankruptcy
The process of filing chapter 11 bankruptcy calls for your business to file a petition, which should include a list of the company’s assets and liabilities. The paperwork submitted should also contain specifics about the financial affairs of the company. Your business will then be required to propose a plan for payment of its debts. This plan needs to be accepted by your creditors.
Additionally, in order for any business to file chapter 11 bankruptcy, the CEO or Chief Executive Officer must be fully on board. This includes complete agreement to follow through with the outlined reorganization plan concerning the assets and debts of the business in question.
Main Purpose of Chapter 11 Bankruptcy Is Reorganization
As the owner of the business, you have to be able to identify the situation or facts that led up to your company’s financial crisis. Your plan for reorganization should also state the pros and cons of reorganizing the business rather than liquidating the assets.
One important thing to be aware of is that bankruptcy is never an option for those businesses that only wish to create a new marketplace. The main purpose of chapter 11 bankruptcy is reorganization, which can help many struggling businesses generate the cash flow necessary for success.
Advantages And Disadvantages
There are several benefits and drawbacks involved with chapter 11 bankruptcy. However, it’s best to weigh them out equally in order to determine if filing is the right choice for your business.
Most would agree that the greatest advantage of chapter 11 bankruptcy is that it’s a reorganization or reconstruction, not liquidation. Therefore, your company is able to carry out normal business operations throughout the legal proceedings. Although court supervision is involved, your company is granted the time it needs to successfully reconstruct the business.
Disadvantages of filing for chapter 11 bankruptcy include cost and time consumption. Chapter 11 bankruptcy is very expensive in terms of overall litigation costs and attorneys fees. It’s also very time consuming. These are some of the reasons for why this procedure is not recommended for individuals or smaller businesses that are in financial trouble. However, if you feel your business can benefit from chapter 11 bankruptcy, then it just might be the right step for your company to take.
If you wish to file for bankruptcy for your business under chapter 11, a professional bankruptcy attorney will be able to answer all of your questions and guide through the full process.
A bankruptcy attorney may only practice in one or many types of brankuptcies/chapters. Click here to find a Chapter 11 bankruptcy attorney