Often if you have your own business you may file for bankruptcy through either Chapter 7 or Chapter 13 and may not necessarily need to file under Chapter 11, which is complex and extremely expensive and fairly rare. Please call to inquire about which chapter is right for you.
Who Files for Ch. 11 Bankruptcy?
In a bulletin titled Corporate Bankruptcy, the U.S. Securities and Exchange Commission summarizes why corporations file for bankruptcy under Chapter 11: “Most publicly-held companies will file under Chapter 11 rather than Chapter 7 because they can still run their business and control the bankruptcy process. Chapter 11 provides a process for rehabilitating the company’s faltering business. Sometimes the company successfully works out a plan to return to profitability; sometimes, in the end, it liquidates. Under a Chapter 11 reorganization, a company usually keeps doing business and its stock and bonds may continue to trade in our securities markets.”
Companies generally turn to Chapter 11 protection after they are no longer able to pay their creditors. Once a company has filed under Chapter 11, its creditors are notified that they cannot press suits for repayment (although secured creditors may ask the court for a “hardship” exemption from the general debt freeze that is imposed). Creditors are, however, permitted to appear before the court to discuss their claims and provide data on the debtor’s ability to reorganize. In addition, unsecured creditors may appoint representatives to negotiate a settlement with the debtor company. Finally, creditors who feel that the debtor company’s financial straits are due to mismanagement or fraud may ask the court to appoint an examiner to look into such possibilities.
Ch. 11 Bankruptcy Process
Once a company asks for Chapter 11 protection, it provides the court, lenders, and creditors with a wide range of financial information on its operations for analysis even as it continues with its day-to-day operations; during this period, major business expenditures must be approved by the court. The business will also prepare a reorganization plan, which details the amount and timing of all creditor payments, the means for effectuating such payments (such as the sale of assets, refinancing, or compromise of disputed claims), and the essential legal and business structure of the debtor as it emerges from Chapter 11 protection. Another important component of this plan is the disclosure statement, which presents projected business fortunes, proposed financial settlements with creditors and equity holders, and estimates of the liquidation value of the company. The information included in the disclosure statement is critical to a creditor’s evaluation of the reorganization plans offered for acceptance, as compared to possible other plans or even liquidation.
The reorganization plan, if approved by the court and a majority of creditors, becomes the blueprint for the company’s future.
Principal factors considered in determining the feasibility of reorganization proposals include:
• Status of the company’s capital structure
• Availability of financing and credit
• Potential earnings of the company after reorganization
• Ability to make creditor payments
• Management stability
• General economic conditions in the industry
• General economic conditions in geographic regions of operation
BAPCPA has also introduced a number of changes governing Chapter 11 filings related to leases, payments made immediately prior to the bankruptcy filing, improved ability of creditors to reclaim products, caps on wage claims applicable to the pre-filing period, and other matters.
Please note that our firm does not handle Chapter 11 bankruptcy filings and that the information contained below is for informational purposes only.
Sacramento Chapter 11 Bankruptcy Attorneys
We are experienced Sacramento Chapter 11 Bankruptcy Attorneys. We have helped thousands of individuals and businesses get the relief they need from their creditors through the use bankruptcy by filing a Ch. 7, Ch. 13, credit card debt negotiation or debt settlement and have successfully dealt with adversary proceedings brought by difficult creditors. Our bankruptcy attorneys have achieved proven results and can give you the great legal advice and strategy needed to get you the results you want. Contact us today to schedule your complimentary attorney consultation by clicking HERE or by calling 916-999-1376. We look forward to helping you with all of your Sacramento chapter 11 bankruptcy needs.
