There are various reasons for corporations, LLCs, partnerships, and even Mom-and-Pops to file Chapter 11 bankruptcy. They include the economic conditions of the day and business mismanagement. They may even involve a change in an owner’s personal status, such as illness or divorce.
A case filed under Chapter 11 of the United States Bankruptcy Code has historically been referred to as a “business reorganization bankruptcy”, although individuals can file Chapter 11 as well. With court approval, businesses are permitted to continue operation during the bankruptcy process. The process involved with filing Chapter 11 is complex and more “formal” than that of filing Chapter 7 or Chapter 13. In addition to a Trustee, there are one or more committees that will review and offer advice regarding the reorganization plan. In most cases there are multiple issues that must be handled separately at evidentiary hearings. The settling of one issue has a domino effect on the outcomes of other issues. The experienced team at Parker & DuFresne is prepared to offer guidance and expert negotiating skills throughout the time-consuming Chapter 11 process.
After initially filing a bankruptcy petition, one of the first actions taken by Parker & DuFresne attorneys is that of filing “first day motions.” They are heard by the court on an emergency basis, more than likely within a few days of filing. Court approval of first day motions is what allows the business to continue making payroll, vendor, and supplier payments. It allows payments to be made for the usual expenses involved with the business. It is what keeps the business going while it is reorganizing. In addition to the protection offered by the first day motions, the debtor receives an automatic stay that stops collection attempts, lawsuits, lien filings, and/or foreclosures. Failure to provide monthly operating report or the use of cash collateral in a manner unauthorized by the court, could result in losing your right to operate the business and allow a third part to take over.
Central to the Chapter 11 process is a plan to repay your debts. It determines who will be paid, when they will be paid, and how much they will be paid for the duration of the plan. Once the plan is “confirmed”, debts are paid in accordance with the confirmed plan. When all plan payments have been made, the Court will enter a discharge, and your Chapter 11 case will be closed. From start to finish, the time involved varies according to the amount of debt and the repayment terms.
Due to the cost and the complex nature of Chapter 11, it is usually not a first resort by individuals as a means of dealing with debt. However, Chapter 11 can be a valuable tool for many individuals. One of the main reasons people file Chapter 11 bankruptcies is so they can lower the balance owed on any secured debt to the fair market value of the collateral, even on a house or property not resided in by the debtor. Another reason is that the individual has more income than the Chapter 7 means test allows or their debt level is higher than that allowed for Chapter 13. In either case, Chapter 11 may be the only bankruptcy option. This experience makes them the right choice when Chapter 11 is your right choice.
Parker & DuFresne attorneys have the expertise to take clients through the steps involved with Chapter 11 Bankruptcy. They are well equipped to act on your behalf by handling the first day motions, the plan, the monthly reports, and the financial disclosures. They are committed to attending all court hearings, and are prepared to negotiate the terms of the reorganization plan. Please contact us for a consultation. We are here to help you keep your business up and running.