CHAPTER 11 BANKRUPTCY REORGANIZATION FOR BUSINESSES

Business owner that needs help

In the face of overwhelming debt and financial difficulties, a business debtor may be able to reorganize its debt and pay creditors over time all while still preserving its business and future. A chapter 11 bankruptcy is often referred to as “reorganization” bankruptcy, and it can offer a lifeline to struggling companies. Under Chapter 11 bankruptcy,  corporations, partnerships, and other businesses have the opportunity to design a repayment plan to repay creditors while keeping the doors of the business open.

If your company is struggling under debt and you are looking for a way out, Chapter 11 bankruptcy may be the best option for you and your company. The decision to file for any bankruptcy should only occur after a careful analysis of your current financial situation along with your long-term goals and concerns with a knowledgeable Fort Worth bankruptcy attorney. As a Fort Worth Chapter 11 bankruptcy lawyer, I can offer experienced guidance so you can start moving towards and planning a more stable and sustainable future for your business.

“Justice at all costs is not justice.”

Thomas Sowell

plan of action

WHAT TO EXPECT FROM THE CHAPTER 11 PROCESS

To begin the Chapter 11 bankruptcy process, you first file a petition for Chapter 11 bankruptcy protection. In some cases, you may be forced to file by creditors in a process known as involuntary bankruptcy.

After filing, an automatic stay is placed on all debt collection efforts against your company. Under the automatic stay, creditors cannot attempt to recover the debt they are owed while the stay is in effect. As a result, the debtor can focus all of its energy on reorganizing its debt and coming up with a plan to make payments while still keeping its business open after the proceedings end.

Under the supervision of the bankruptcy court, you then decide upon a repayment plan to repay creditors. The repayment amount is typically far lower than the amount originally owed. Meanwhile, your company continues to operate without interruption.

After the court approves your repayment plan, the debts that existed before the creation of the plan are restructured. You must now repay your debts according to and in compliance with the terms of your repayment plan.

FREQUENTLY ASKED QUESTIONS ABOUT CHAPTER 11 BANKRUPTCY

Who qualifies for Chapter 11 bankruptcy?

Chapter 11 bankruptcy is not exclusive to business owners. Any individual, along with most businesses, can file for Chapter 11 bankruptcy.

What is the difference between Chapter 11 and Chapter 7 bankruptcy?

Chapter 7 and Chapter 11 bankruptcy are similar but have one primary difference. While Chapter 11 bankruptcy is used to reorganize debts and repay them while still keeping your assets, Chapter 7 bankruptcy takes your assets and liquidates them to sell and pay back your debts. At the end of a Chapter 7 bankruptcy, your business will be closed and likely broke. At the end of a Chapter 11 bankruptcy, you may still have your business and most, if not all, of your assets.

What are the benefits and consequences of Chapter 11 bankruptcy?

Some benefits of Chapter 11 bankruptcy include:

Being able to run your business while going through the bankruptcy process.
Reorganizing how you want to pay back your debt, helping to relieve some stress from trying to figure out how to pay your creditors within a specific time frame.
Having an automatic stay put on your accounts payable so that creditors cannot harass you during your bankruptcy process.

Some consequences of Chapter 11 bankruptcy include:

Losing some control over your business. During the bankruptcy process, certain business decisions need to be made by others, so you don’t have full control of your business operations while you’re in the process.
Loss of privacy. When you file for Chapter 11 bankruptcy, all of your information, except personal information like tax ID numbers, are viewable by anyone in the public. While this might not be a considerable drawback to some, others might not be happy with this information being known by anyone.
Possibly losing shareholder control. In some cases, after a Chapter 11 bankruptcy, old stock in the company can drop to zero, causing shareholders to lose their investments entirely. This is not the case for every Chapter 11, but it is something to be aware of before filing.

How should I prepare for Chapter 11 bankruptcy?

The first thing you need to do is find an experienced and local Chapter 11 attorney. I will help guide you through the process and make the best decisions for you and your company. The next step is to gather all of your financial records for review. The more detailed your records, the better.

Can I pay my employees while filing for Chapter 11?

You can usually pay employees. Depending on your situation, you might need to file a “Motion to Use Cash Collateral,” in which you ask the court if you can use those funds for paychecks. Sometimes a debtor is wholly prohibited from spending any funds, but that is dependent on the case.

How does reorganization work in Chapter 11 bankruptcy?

A plan of reorganization is developed between a Chapter 11 bankruptcy attorney and the debtor. It separates creditors into groups to help organize how they will be repaid. Similar creditors are put into the same group, and the debtor is not allowed to discriminate against a creditor or a group of creditors. This plan can do things such as change rates and dates on loans and lower the amount owed to creditors in some cases. After being drafted, this document must then be voted upon before it is put into action.

How is the plan voted upon?

The plan is voted on by each group of creditors. The plan is put in place if at least half of the group votes for the plan and if more than two-thirds of the dollar amount in claims within that group votes yes.

Do my creditors vote on the reorganization plan I set up?

Creditors do vote on your reorganization plan. Each of your creditors is allowed to either vote for your reorganization plan or against it. Each creditor also is counted by the dollar amount that is owed to them. If enough creditors vote yes on your plan, and if the total combined value of those creditors is more than two-thirds of what is owed in that creditor group, that group is considered to vote in favor of the plan.

How much does Chapter 11 cost?

At the present time, the filing fee is $1,738.00. The cost of Chapter 11 at the very end is different in each case. The debtor, in some cases, can be expected to not only pay for their own costs but some of the costs of their creditors as well. To get a better idea of what filing a Chapter 11 might cost you, it would be wise to speak to a Fort Worth bankruptcy attorney.

What is a confirmation hearing?

A confirmation hearing is when the courts review your Chapter 11 plan and considers votes to either put it into effect or have you make a new one. Even if the creditors all vote to put the plan in action, it will not be approved until the court reviews it.

What happens if you still cannot pay your debt back after applying for Chapter 11 bankruptcy?

First, there will be a new meeting that will discuss what should happen next. Then, your Chapter 11 could be turned into Chapter 7, which means all of your assets will be liquidated to pay your debts. Creditors could also sue you for breach of contract, which would serve as a means for them to try to get their money back.

HIRE AN EXPERIENCED FORT WORTH CHAPTER 11 BANKRUPTCY ATTORNEY

If you are in need of a Chapter 11 attorney, I am here for you. I have over a decade’s worth of experience working with companies in need of Chapter 11, and I am ready to use it to help you get out of debt. Going through bankruptcy is hard, but it doesn’t need to be scary. With an experienced lawyer working with you, you can breathe easy knowing that you have someone with you who knows the process, knows the system and will keep your best interests in mind when developing your reorganization plan.

I want to see you and your business come back from bankruptcy. I aim to help my clients not just return to life before bankruptcy, but to thrive after bankruptcy. With my guidance, I hope to watch you and your business succeed

Devoted to you.
all the way through.