June 20, 2019

Chapter 11 Bankruptcy

Past Due BillChapter 11 bankruptcy is a reorganization. More businesses than individuals file for Chapter 11; it is an orderly process that allows the debtor time and space to reorganize its financial affairs and repay its creditors some or all of the debt owed.

It is a vehicle through which debtors can reject or cancel certain leases, contracts, and other debt obligations, and get breathing room to obtain new financing, sell property, or otherwise arrange to repay creditors.

Is Chapter 11 the right step for you?

My typical Chapter 11 client is a small, closely held business with cash flow problems. The source of the problems varies; common problems include the decline of the housing market, growth and expansion at a fast pace, embezzelment by an employee, a change in ownership or leadership, or a balloon payment due to a bank that is unwilling to refinance.

Whatever the reason, the first step is working with you to determine whether a reorganization of the business would enable it to thrive, and whether the business can afford a Chapter 11 case. If the answer to both of these questions is “yes,” then I will prepare the Chapter 11 petition and schedules, and file it in the bankruptcy court.I designed Chapter 11 Bankruptcy Facts and FAQs for those seeking further information.

Compared to Chapter 7 cases, Chapter 11 cases are longer in duration, and more complex in terms of legal work. The ultimate goal is to formulate and present a written plan for my Chapter 11 debtors to reorganize their affairs and repay their creditors according to the priorities of the Bankruptcy Code.

What to expect when filing Chapter 11

  1. Once my office files the petition, debts that are included in the petition (known as “pre-petition debts”) must be handled through the bankruptcy court, and only by creditor contact directed to my office or the court. In other words, creditors can no longer contact the debtor directly regarding collection of those pre-petition debts.
  2. Within thirty days of the filing of the petition, a representative of the debtor must attend a hearing known as the first meeting of creditors. I attend this hearing with my Chapter 11 clients, and take an active role in preparing them for the hearing and representing them during the hearing. A representative of the bankruptcy administrator’s office asks questions about the petition, the debtor, and related issues. Creditors also have the right to attend and ask questions.
  3. Creditors have the right to vote to approve or reject the plan; however, the bankruptcy court has final approval over all Chapter 11 plans.
  4. There is a strong preference under the Bankruptcy Code for business owners and managers to continue to run the day-to-day affairs of the Chapter 11 debtor while the bankruptcy case is open. This is known as a “debtor in possession.” However, when this is impractical or impossible, the bankruptcy court can appoint a bankruptcy trustee to manage the business while the bankruptcy case is open.

I have significant experience in representing debtors and creditors in Chapter 11 cases, the court has appointed me to be a Chapter 11 trustee in numerous bankruptcy cases, both large and small.

Call my office to set an appointment. 704.333.0630

Together, we will determine the best strategy for legally handling your financial troubles.

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