What is Chapter 11 Bankruptcy?
Chapter 11 Bankruptcy is most often associated with businesses. Typically, Chapter 11 is an option to larger corporations, but small businesses can also benefit from Chapter 11. Companies that have very high debt burdens can benefit from Chapter 11 bankruptcy. This type of bankruptcy allows the company to restructure or reorganize their debts, with the goal to become profitable again post-bankruptcy.
How Do I File for Chapter 11?
To initiate Chapter 11 bankruptcy, a debtor can file a petition with the United States Bankruptcy Court. Once the petition is filed, the case commences and an automatic stay of collections actions is in effect. What does this mean for the debtor? Well, once the stay is in effect, creditors may not pursue collection activities (new or existing). If the court issues a modification of stay, however, collection may be able to resume.
What Happens After the Petition is Filed?
After a petition is filed, business for the debtor should resume as normal. The debtor can also begin to create a reorganization plan or a restructure of its business debts. They can begin to negotiate more feasible repayment options and terms with its creditors. The benefit of this is that the debtor can continue with its normal operations without losing too much sleep over their obligations. Debtors can renegotiate leases and contracts, have debts discharged or pay them in part. In many cases, creditors are open to working with the debtor.
Will the Court Approve my Reorganization Plan?
The Court may approve a reorganization plan so long as it is done in good faith and in compliance with the law. Once the plan is confirmed, debts may be discharged (if they were agreed to be discharged) and new payments and payment terms can come into effect.
If you own a business and are looking to file Chapter 11 Bankruptcy, you should consult with an experienced bankruptcy attorney. If you have questions about filing for bankruptcy or need assistance getting started, please contact the Radol Law Firm today and we would be happy to help.
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