Chapter 11 Bankruptcy Allows Your Business to Restructure Debt and Continue Operations, And Works for Individuals in Certain Cases

Is your business struggling to repay creditors, or service your existing debt?

Chapter 11 Bankruptcy allows reorganization and debt restructure, usually for businesses, and in certain cases for individuals. In Chapter 11 Bankruptcy, you propose a plan of reorganization to keep your business in operation and pay creditors over time. You can also complete an orderly liquidation to maximize return. It’s a complex process to be considered after evaluating all options outside bankruptcy. Expect the process to require 180 days or more to obtain confirmation.

How Chapter 11 Bankruptcy Works

Like all chapters, a case begins with the filing of the petition and the various schedules of assets, liabilities, income, and expenses. You divulge these in a disclosure statement. Once you file your case, your business becomes a “debtor in possession.” This term refers to a debtor that keeps possession and control of its assets, while undergoing a reorganization under Chapter 11, without the appointment of a trustee.

You remain a “debtor in possession” until the Plan of Reorganization is confirmed, the case is dismissed, or if it’s converted to another bankruptcy chapter. However, you may be prohibited from making certain decisions without court permission. For example, this could be the sale of certain assets, other than inventory. Courts can also impact your decision to enter certain contracts.

Your Plan of Reorganization documents your claims and specifies how each creditor claim will be treated under the plan. Usually, you negotiate repayment arrangements for much less than the original amount owed. In some cases, you may have debts discharged entirely. At the same time, your plan must be in the best interest of your creditors. The only other option for your creditors is Chapter 7 liquidation, in which you have your debts discharged entirely.

This is a rough guide ranking payments to creditors:

  1. Administrative claims
  2. State and federal tax agencies
  3. Employee wages
  4. Secured creditors
  5. Unsecured creditors
  6. Stockholders

Once you have proposed your reorganization plan, certain creditors have the opportunity to vote per class issue for or against its confirmation. Finally, the court approves your plan, assuming you meet all legal requirements.

You will be required to provide monthly operating reports to the court for review by creditors and parties in interest. Reports are required until you have substantially complied with the plan and obtain a conditional closing order from the court.

When Working with a Chapter 11 Bankruptcy Attorney Applies to Individuals

In certain situations, Chapter 11 may be filed by individuals. This may happen when you have income greater than that allowed by the Chapter 7 means test, or debt greater than what’s allowed by Chapter 13. For example, if you have extensive real estate holdings, but don’t have the liquidity to pay debts as they become due, Chapter 11 may be an option. It is a complex process but highly effective for individuals with substantial assets and debts.

For individuals, you may be allowed to retain assets beyond Chapter 7 and 13 bankruptcy.

Is Your Business Struggling to Stay Afloat? Bill Payne, Bankruptcy Attorney in Dallas, Helps You Reorganize and Restructure Budgets.

With more than 30 years of experience in Chapter 11 bankruptcies, I know how to help you navigate this complex, overwhelming process. You don’t need any more stress than you already have. I’ll walk you through every step. You’ll know exactly what’s going to happen, and I’ll make sure you get fair treatment from courts and your creditors. I serve clients in Dallas and throughout North Texas.

To schedule a free consultation and learn whether Chapter 11 bankruptcy, or another kind, makes sense for your business, call 972-628-4905 or email my assistant of 20 years, Brandy Terry, at bterry@wpaynelaw.com today.