Basic Features of a Chapter 11 Bankruptcy
Chapter 11 filings are generally reserved for business debtors. Corporations, partnerships, LLCs and even sole proprietors may be eligible to seek relief from business creditors. Individuals may also choose this type of bankruptcy filing if their income exceeds limits set on Chapter 7 or Chapter 13 filers. While most Chapter 11 filings are done voluntarily by the business owner, in some cases, business creditors can actually compel the filing.
As with all bankruptcies, the process begins with the filing of a petition in the appropriate bankruptcy court. It’s important to understand which court might have jurisdiction. In most cases, the filing will take place where the business is conducted, incorporated, or otherwise organized, as in the case of an LLC.
Tampa Chapter 11 Bankruptcy Lawyer Explains the Basic Processes in a Chapter 11 Bankruptcy
One of the main differences between a Chapter 11 filing and the more common Chapter 7 or 13 filings comes in the way business is conducted after the fact. In a Chapter 11, the business will continue to operate as before. However, the Bankruptcy Court how has oversight of major decisions. This can include entering into new contracts, sale or transfer of assets, buying or selling real estate, ceasing or expanding new business operations, etc. It is for that reason that many businesses prefer the less restrictive Chapter 13 filing, but, as indicated above, this is not always an option.
How Debts are Handled in a Chapter 11 Filing
The main thrust of a Chapter 11 filing is the reorganization plan. The business debtor must come up with a restructuring to satisfy its business creditors. The reorganization plan can be complex to draft and your attorney can work with you. Any proposed reorganization or restructuring plan must be approved by the bankruptcy court and is subject to approval and objections from the business creditors. The reorganization plan must address how the business will repay its outstanding debt. There is no guarantee whether any particular plan will be approved, but courts look at whether the plan is feasible, made in good faith and serves the best interests of the creditors. The court can also review the plan on the more general principles of fairness and equity. Even if the court finds the other considerations have been met, if a plan does not pass the “fairness and equity” test, it may not be approved.
Attorney Robert Savage has vast experience and a proven track record of getting positive results for clients in difficult positions. Call 813.251.4890 to make an appointment with an experienced Tampa Chapter 11 bankruptcy lawyer who can carefully review your case and give you sound legal advice about how to proceed.