Whether you’re a business owner or an ordinary individual, filing for bankruptcy can be a stressful experience. Most cases are filed as Chapter 7, Chapter 11, or Chapter 13 cases. In this blog, we will discuss Chapter 11 bankruptcy filings.
Here are some important features of a Chapter 11 bankruptcy:
It Can Help You Restructure Debts – Chapter 11 bankruptcy is most often used by businesses, but in rare cases, it can be helpful to individuals and small business owners who have significant assets and larger liabilities as well. It allows the debtor in possession to restructure and reorganize their debts, assets, and business affairs. If an individual’s assets and liabilities are not large, in most cases, they will file a Chapter 13.
Thousands of Corporations Have Survived and Thrived After Filing – You can still operate your business after you’ve filed for Chapter 11 bankruptcy. In fact, countless corporations have survived and stayed afloat during the process, including Kmart, General Motors, United Airlines, and thousands of other corporations. In this region, over one thousand claims have been filed in the Peabody bankruptcy. The process can take up to two years.
You’ll Need Court Approval for Additional Business Actions – The Chapter 11 debtor can operate the business and can even engage in transactions without court approval if they are in “the ordinary course of business.” If the debtor would like to complete a transaction that is not in the ordinary course of business – for example, selling a piece of property – court approval is required. Other examples are starting or terminating a rental agreement, stopping or expanding business decisions, and entering contracts with vendors or unions. For example, in the Peabody bankruptcy they are presently pending with the Bankruptcy Court motions, which seek to relieve Peabody of its obligations with the UMWA under the collective bargaining agreement.
You Can Create a Reorganization Plan – When you file for Chapter 11 bankruptcy, you will be required to create and file a reorganization plan. This usually includes downsizing business operations in order to reduce expenses and renegotiate debts. In some cases, liquidating all assets to repay creditors is proposed. Chapter 11 plans do require creditor cooperation.
Bankruptcy can give your business a second chance to succeed! If you are considering filing for bankruptcy, call the experts at Bankruptcy Advocates. Call us at (618) 549-9800. Consultations are free!