Filing a Chapter 11 bankruptcy is a way for businesses to restructure their finances and to eliminate debt. This is the only option for businesses who want to continue operations. Also, this may be the only option for businesses and individuals who have too much debt or income to qualify for Chapter 7 or 13 filings. It is more cost efficient and comes with less risk to file a Chapter 7 or 13 if possible.
To find out if you qualify for a Chapter 11 bankruptcy filing, call me today at The Pittsburgh Tristate Bankruptcy Firm. We will review your financial situation, including debts and assets, and decide which type of bankruptcy filing is best for you.
Relating to Business
Businesses in severe financial distress may file for Chapter 11 bankruptcy. Usually, a debtor will voluntarily file by petitioning the bankruptcy court. Sometimes, however, creditors will file an involuntary petition against a defaulting debtor. The debtor will continue to operate the business. Unlike a Chapter 7 bankruptcy, a trustee is not typically put in place during a Chapter 11 filing (although a trustee can be appointed if the court finds it necessary in cases of fraud or when there is gross mismanagement of finances). A Chapter 11 case can take anywhere from a few months to two years to complete.
Although the debtor continues to operate the business, once a Chapter 11 has been filed, the bankruptcy court has final approval of major decisions. This would include: sales of assets, signing or breaking a lease agreement, entering into or modifying other contracts, and any other decisions which would shut down or expand business operations. The bankruptcy court takes the opinions of the creditors, shareholders, and unsecured creditors’ committee into consideration when approving or denying major decisions.
It is the debtor’s responsibility to create a reorganization plan. One of three things can then happen: the plan can be approved, the creditors’ committee can propose a competing plan, or the creditors can move to dismiss or convert the case to Chapter 7 bankruptcy. The plan must meet certain requirements for the bankruptcy court to grant approval. The court must find that the plan is likely to succeed, it is being proposed in good faith, abides by the law, and it is in the best interest of the creditors. Chapter 11 bankruptcy does not happen without risk, most cases are dismissed or converted to Chapter 7 and only 10-15% of cases are successful at reorganization. If successful, however, the business will be restructured and may continue operations.
Filing for Chapter 11 bankruptcy can be a complicated matter. Every business is unique and should be treated as such. At the Pittsburgh Tristate Bankruptcy Firm we take the time to go over all the details of your business’s financial situation and review all options with our clients. You’ll walk out the door feeling confident and well informed about your bankruptcy choices. To schedule an appointment with our legal team call The Pittsburgh Tristate Bankruptcy Firm at 1-844-748-8384.