How Chapter 11 Bankruptcy Works
Chapter 11 Bankruptcy is often referred to as a “reorganization” or “restructuring” case because the goal of a Chapter 11 case is to make changes to your operations in order to fix whatever has caused your business or personal life to no longer operate the way it should.
Businesses facing foreclosures, repossessions, unrealistic lender demands, or the inability to timely pay all operating expenses and creditors can use Chapter 11 in order to develop a workable plan to repay creditors what you can afford. During the case, businesses continue their operations free from the constant repayment demands of their creditors. During this time, the business develops a plan to make changes to its business model. These changes can take the form of:
By far, one of the biggest advantages of a Chapter 11 case is that the Bankruptcy Court can overrule the demands made by creditors about how they are paid, as long as the proposed repayment terms are “fair and equitable” to the creditor. This ability to have a Bankruptcy Judge determine the repayment terms allows you propose terms that work with your business, and not just accept those dictated by your lender.
The other advantage to filing Chapter 11 is the break from creditor interference in your day to day operations. Once your business has filed for bankruptcy, creditors must immediately stop collections efforts, stop phone calls, and foreclosure sales, or attempts to pick up equipment. This frees up your time to focus on running your business, instead of constantly responding to creditor demands. At the conclusion of your Chapter 11 case, creditors are repaid only the amount approved by the Court, and your business is given a fresh start to operate.
Individuals with large amounts of debt may also file chapter 11 in order to take advantage of a court-ordered payment plan if their debts exceed their ability to repay them. Individuals have the same ability to propose changes to their assets and liabilities as businesses do, or to sell unnecessary assets, terminate unmanageable leases, or restructure the repayment terms of loans or contracts.
Since the future success of your business depends greatly on the quality of your Chapter 11 plan, you should seek reliable advice from an experienced business bankruptcy attorney. Stubbs & Perdue has board certified Business Bankruptcy Attorneys and Paralegals to help guide you through this process.
Stubbs & Perdue handles business and individual Chapter 11 bankruptcies throughout Eastern North Carolina, and statewide. Call 1-800-348-9404 or contact us online to schedule your bankruptcy consultation.
To learn more about chapter 11, click on the links below to review articles written or recommended by our attorneys.