The Chapter 11 Bankruptcy Process
After filing for Chapter 11 bankruptcy, the distressed business gets immediate relief from creditors thanks to the halting of all collections actions. In the ensuing weeks, company leadership will need to propose plan for dealing with its outstanding debt and creditors. This will typically involve restructuring the business’s finances
Chapter 11 restructuring plans can be as varied as the business entities that file them. Under certain circumstances, a business entity can sometimes shed itself of unsecured debt, while retaining assets and continuing operations. Under other circumstances, a business may propose to downsize and/or sell off certain assets, while proposing to repay necessary creditors.
The business’s plan must be approved by the Bankruptcy Court and will be evaluated based on the following factors:
- Good Faith. The business must be acting in accordance with the Bankruptcy Code and make no attempt to break or subvert any relevant law or regulation.
- Feasibility. The plan must have reasonable odds of success. Creditors and the Court will object to plans that have logical gaps or are incompatible with the company’s available resources.
- Best Interests of Creditors. In order to satisfy this provision, a plan must demonstrate that it would ultimately pay as much to creditors as they would have received in a Chapter 7 bankruptcy liquidation. In other words, you must demonstrate that the continued operation of the company and a partial repayment is as beneficial to creditors as a complete sale of the company’s remaining assets.
- Fairness and Equitability. Secured creditors must receive at minimum the value of their collateral. Equity holders must discharge ownership rights unless the underlying debts are paid in full or new money is funneled into reorganization.
Every Chapter 11 bankruptcy is different and will need to be tailored to the practical needs and circumstances of the business. Our Howell Chapter 11 bankruptcy attorney can help your company strategize on how best to approach your reorganization plan and ensure it meets all regulatory requirements.
Get the Relief You Need Through Chapter 11 Bankruptcy
The goal of a Chapter 11 bankruptcy is to help it weather adverse conditions and emerge in a more secure, sustainable financial position. Our Howell Chapter 11 bankruptcy lawyer at Fedoroff Firm, LLC can help you through each step of your filing, including working with your partners to develop a fair and equitable plan that will provide you the relief you need to succeed. We can also help you explore alternative uses to Chapter 11 bankruptcy, including filings for individuals and the newer Subchapter V expedited option for smaller businesses.