Chapter 11 bankruptcy is usually called as business reorganization. This gives businesses a little bit more time to repay debts. The business has to submit a reorganization plan to the bankruptcy court, get it accepted by a majority of the creditors and then execute it to perfection. If the owner does not want to file for a Chapter 11 business bankruptcy, but the business already needs it, then an out-of-court negotiation should be thought about. Here’s what an out-of-court settlement entails: 1. An out-of-court deal can only work if the business is serious and the creditors are willing. If there are two or three creditors who aren’t taking part, it is already enough to kill the negotiation. 2. Before contacting creditors, the business owner must first make a plan that shows how creditors will be paid back by using cash flow, new loans and issue of equity to interested parties. This means that the business owner must make sure that his business is sustainable enough to generate cash flow, attract investment and obtain loans to pay off existing creditors. The plan must be solid and should conclusively prove how the business will turn around and repay its debts. The business owner should seek the services of a reputed and experienced financial adviser to draft the plan. 3. One of the best ways to finish the out-of-court settlement is to look for a creditor that will be a replacement. But, that could be hard if the owner is facing business bankruptcy in the first place. A replacement creditor comes with costs and strings attached, so every business owner must be cautious. 4. The next step is to employ an attorney who’s reputed and experienced in negotiating with creditors. A lawyer who represents business owners in Chapter 11 business bankruptcy cases should be skillful enough to deal with creditors. 5. The hardest part is the next step, which is the actual negotiation with creditors. There are different kinds of creditors - priority, secured, semi-secured and unsecured. Each class of creditors must be satisfied. The business owner must realize that any of the creditors can hit the panic button during the negotiations. Lawyers basically negotiate on a one-to-one basis with secured creditors, and they secure forbearance agreements. The moment it is in place, it now becomes less difficult to negotiate with unsecured creditors. A meeting of unsecured creditors is called and facts are placed before them along with the restructuring plan. They are informed of the consequences of a Chapter 11 or Chapter 7 bankruptcy. The unsecured creditors are requested to lessen their debt and take a one time settlement, or make it possible for more repayment time. 6. An out-of-court settlement can work as well as a Chapter 11 business bankruptcy. However, the biggest drawback to such deals is that these are not binding. In a Chapter 11 business bankruptcy, the court officially stops creditors from making collection attempts or filing lawsuits. No such protection come built into out-of-court agreements. Visit the site www.business-bankruptcy.com.
Chapter 11 business bankruptcy is also referred to as business reorganization. It involves filing a reorganization plan (along with specified financial documents) with a bankruptcy court. All creditors are called for a meeting by the court, and they have to vote on the reorganization plan presented, which must be approved by 3/4th majority. The reorganization plan is carried out by the business, and once the bankruptcy ends, the business becomes free from debt. Chapter 11 Business Bankruptcy Warning Signs: - When the money that you have withheld for taxes is already being used. That money needs to be paid to government, however, if you already use it for business, it signifies that you are cash-strapped. - Whenever you keep stretching payments to vendors for a long period of time, not able to pay vendors punctually, or when you are already desperate for credit and keep on switching vendors. - When serious instances that could affect the business happen such as a natural disaster, death of a partner, or embezzlement, and the like. - When you are often late or unable to repay secured debt installments. - When your business has one or two customers and they declared business bankruptcy. Business owners tend to wait for better times and expect their creditors to listen to them, which is in fact one of the biggest mistakes they could make. Creditors want repayment of debts and will do anything to get their money back. A business owner must designate a Chapter 11 business bankruptcy attorney as soon as the warning indicators emerge. Hiring an attorney can aid the business look into options other than bankruptcy as well. For example, the attorney will first evaluate the situation and then suggest a debt restructuring exercise or a debt-for-equity swap. If the business owner does not hire an attorney, then he is simply digging a deeper hole for himself. There is no simple business bankruptcy. Child support, taxes, alimony, etc, which are classified as priority debts would have to be paid, and if the business owner's personal property has to be sold just to repay these, then it has to be done. When it comes to priority debts, the law does not take pity. So if priority debts are the cause why a business is struggling, then a Chapter 11 business bankruptcy is not the option but a Chapter 7 bankruptcy. Once priority debts are met, secured creditors come next, followed by semi-secured creditors and eventually unsecured creditors. In a Chapter 11 business bankruptcy, majority of these creditors ought to agree with the reorganization plan. The moment that a reorganization plan is agreed upon, it must be carried out properly by the business owner. The creditors could take legal steps to recover their money in the event that the Chapter 11 process fails, which could come about if the business owner does not execute the plan.
Are you an owner of a small business being strangled by huge debts and limited cash flow? Are you unable to repay your priority, secured and other debts? Do you use money from taxes withheld for business purposes? If you are in such a circumstance, the following business bankruptcy FAQs could help you understand the things that are involved: 1. What are the various kinds of business bankruptcies? Chapter 7 or Chapter 11 bankruptcy can be filed for by sole proprietorships, partnerships, LLCs and corporations. Chapter 7, which is liquidation, involves non-exempt business assets being put up for sale, and the proceeds are then used to repay creditors. The business ceases to exist after the bankruptcy process is complete. Chapter 11 is business reorganization. It allows businesses more time to be able to repay debts. Businesses that have come to realize that there is no longer any point to continue business operations could file for Chapter 7, while those that are still feasible could file for a Chapter 11 business bankruptcy. 2. What are the issues of a business bankruptcy filing? Sole proprietors must file for a bankruptcy under their own name given that a sole proprietorship type of business is considered as an extension of the owner of a business. In a Chapter 7 bankruptcy relating to a partnership firm, the partners face the risk of being sued by the case trustee if it so happens that the business assets are not sufficient to repay the debts. 3. Chapter 7 or Chapter 11 business bankruptcy - which one must a business choose? Business owners have to understand that by filing for a Chapter 11 bankruptcy, which would reorganize the business, he cannot just expect much better market conditions. A business owner should only opt for Chapter 11, if his business could generate future profits based on the business’ strengths at present. A Chapter 11 business bankruptcy would help owners free up a bit of cash, which could be used to run business operations on a day-to-day basis. It will also help the business owner to reject expensive leases and to prevent business assets from being taken over by creditors. 4. What transpires when a Chapter 11 bankruptcy process fails? A Chapter 11 bankruptcy that fails would be converted by the court to a Chapter 22 bankruptcy, which is like that of a Chapter 7. In this type of bankruptcy, business assets will be sold, and after a Chapter 22 bankruptcy process is complete, the business would not exist anymore. 5. What should the business owners take note of? Before considering a Chapter 11 bankruptcy, priority debts of business have to be calculated first. If priority debts could not be paid, then he couldn’t be aided by a Chapter 11 business bankruptcy. He should also check how much his secured debts are. Secured creditors don’t decrease a business owner’s debts because the former could always take possession of the assets of the business. Business owners have to put together a list of his creditors and determine their classification and their priority, before he finally decides on a particular business bankruptcy category. Business owners have to focus on these critical factors before they seek protection under either a Chapter 7 or a Chapter 11 business bankruptcy.
Business owners who do not want to seek protection under Chapter 11 business bankruptcy can consider an Assignment for benefit of Creditors. This option should only be taken into consideration when the business is no longer sustainable because of an unprofitable product line and/or a mountain of debt. An assignment for benefit of creditors is different than Chapter 7 and Chapter 11 business bankruptcy. In fact, it is a substitute for Chapter 7 bankruptcy and business owners who need reorganization, not closure, must not consider it. Businesses that need restructuring must opt for Chapter 11 bankruptcy instead. An Assignment for Benefit of Creditors is a process that is governed by state law and therefore it varies from state to state. It is supervised by state courts. In an Assignment, an assignee is empowered by the state court to take control of the assets of the business. The assignee is usually chosen by the business owners and the creditors and it is important that the assignee is reputed and experienced. You need to take note that in the case of a business bankruptcy, it is the court that chooses the case trustee. The business owner has to assign the business assets to an assignment estate. A fiduciary role is played by the assignee towards the creditors, and he makes it a point to be able to sell the assets of the business at the maximum price. After he sells the assets, he pays the creditors, deducts fees and costs, and returns the balance to the business owner. All other processes in an Assignment move like they do in a Chapter 7 business bankruptcy. The business owner files a list of all business creditors. Creditors are then notified by the assignee of the Assignment, and would set a date wherein creditors must be able to lodge their claim. Once the assets are transferred to the assignment estate, the business becomes hollow. Even if a case is filed against the business, the creditor wouldn’t get anything. A business owner must choose Assignment over business bankruptcy when the market price of all the business assets is insufficient to cover the debts. Assignment is less formal than a business bankruptcy process and moves much faster. Creditors cannot object to any sale made by the assignee. However, an assignee cannot force-transfer leases and contracts until the other party consents. No such consent is required in a Chapter 7 or Chapter 11 business bankruptcy. So, a business owner with franchisees should consider bankruptcy, not Assignment.
Business bankruptcy may appear to be an easy way out for businesses that are heavily weighed down by debt, but bankruptcy is not as simple as it may seem. You need to determine whether or not your business has good potential. If your business does not have any future, then you may opt to file for bankruptcy under Chapter 7, which will help liquidate the business. However, if you can see some light at the end of the tunnel, you may prefer to file for bankruptcy under Chapter 11, which will help reorganize the business. Consider contemplating on and preparing the following before you file for business bankruptcy: 1. Keep your financial statements, tax records, and a list of contracts (executed and under execution) ready. These have to be filed together with the petition. 2. Filing for business bankruptcy demands an attorney who is an expert at your type of bankruptcy. For example, filing for a Chapter 11 bankruptcy would need you to have somebody who is an expert in Chapter 11 bankruptcy and not with a Chapter 7 bankruptcy. This is because under Chapter 11 bankruptcy, you must adeptly present your case to creditors and an attorney who specializes in Chapter 7 bankruptcy may not be good at it. Chapter 7 bankruptcy on the other hand, is very simple and blunt, your business must be liquidated and so the court will help you liquidate it. Reorganization under Chapter 11 bankruptcy would require discussions between you and your creditors, which would be more complex as compared to liquidation. 3. A Chapter 12 bankruptcy is for farmers, while a Chapter 13 bankruptcy, which is also known as a wage earners’ bankruptcy, is for sole proprietors, who are also wage earners. 4. It is essential that you will be honest with your lawyer, and inform him about the littlest financial detail that will support the bankruptcy case. Let him know about those things that are classified as priority debts which consist of employee benefits, child support, alimony, etc. Remember to notify your lawyer about how many creditors you have and whether they belong to secured, unsecured or partially secured creditors. 5. If you would be going for a Chapter 11 bankruptcy, you will be obligated by the court to be the case trustee (except of course in cases of fraud), and you will then become a debtor in possession. There will be an appointed committee of creditors, and a reorganization plan would be required of you to be handed in to court. If the committee of creditors approves of the reorganization plan you presented, then the court will give its affirmation. If Chapter 7 bankruptcy was your choice, then you need to submit to the court a list of your non-exempt assets, which will be sold off, and the proceeds shall be divided among creditors according to their priority. Indeed, filing for business bankruptcy is not that simple and could get quite complicated in the process. Get hold of a lawyer who specializes in your type of bankruptcy before moving an inch. Good luck.
Many businesses look at a business bankruptcy as a way to get out of debt, however, bankruptcy is not that easy. You need to determine whether or not your business has great potential. A Chapter 7 bankruptcy, which would liquidate the business, will be applicable if your business doesn't have a future anymore. On the other hand, filing for a Chapter 11 bankruptcy would be ideal if you see that your business could still hack it in the future. Consider pondering on and preparing the following before you file for business bankruptcy: 1. Prepare tax records, financial statements and contracts, both executed and under execution. These need to be filed together with the bankruptcy petition. 2. Filing for business bankruptcy requires an attorney who is an authority at your type of bankruptcy. For instance, filing for a Chapter 11 bankruptcy would need you to have someone who is an expert in Chapter 11 bankruptcy and not with a Chapter 7 bankruptcy. This is primarily due to the fact that a Chapter 7 bankruptcy lawyer may not be good at presenting your case to creditors, which is required in a Chapter 11 bankruptcy. A Chapter 7 bankruptcy is very straightforward in a way that the court would just help you liquidate your business. Reorganization under Chapter 11 bankruptcy would require negotiations between you and your creditors, which would be more complex as compared to liquidation. 3. A Chapter 12 bankruptcy is for farmers, while a Chapter 13 bankruptcy, which is also known as a wage earners’ bankruptcy, is for sole proprietors, who are also wage earners. 4. Be honest and truthful with your lawyer and tell him every single financial detail that will help your bankruptcy case. Let him know about those things that are categorized as priority debts which consist of employee benefits, child support, alimony, etc. Remember to inform your lawyer about how many creditors you have and whether they belong to secured, unsecured or partially secured creditors. 5. If you would be opting for a Chapter 11 bankruptcy, you will be obligated by the court to be the case trustee (except of course in cases of fraud), and you will then become a debtor in possession. There will be an appointed committee of creditors, and a reorganization plan would be required of you to be submitted to court. If the committee of creditors approves of the reorganization plan you submit, then the court will give its affirmation. If Chapter 7 bankruptcy was your option, then you need to submit to the court a list of your non-exempt assets, which will be sold off, and the proceeds shall be split up among creditors according to their priority. Indeed, filing for business bankruptcy is not that easy and could get quite complicated in the process. This is why it is essential for you to hire a business bankruptcy lawyer who have had in depth experience in dealing with the type of bankruptcy that you would be filing. Good luck.
Many businesses file for bankruptcy because of a number of reasons such as incapacity to pay business debts, needing more time to gather funds to pay debts or having unsuccessful product lines. Businesses employ bankruptcy attorneys to take control of the bankruptcy process, which could fall either under Chapter 7 or Chapter 11. A Chapter 7 bankruptcy is a liquidation, while a Chapter 11 bankruptcy is referred to as business reorganization. When the entire business bankruptcy process is over, the business becomes free of debts. The following are among the business bankruptcy facts that you ought to know about: 1. A number of debts are categorized as priority debts and it is impossible to part-pay or avoid paying these. The business owners are personally accountable for debts like taxes, alimony, child support, student loans, court fines or penalties, criminal penalties imposed by the law, debts on account of injuries caused to others while driving under the influence of alcohol or drugs. With priority debts, even the finest business bankruptcy attorneys could not help you. 2. Only those debts that were acquired prior to the filing of bankruptcy can be protected by the bankruptcy petition. Debts that were acquired after the bankruptcy petition date do not fall within the purview of the bankruptcy process. 3. Clients are advised by business bankruptcy attorneys to list each debt incurred according to their schedule. The business bankruptcy process cannot relieve debts that are not stated. 4. If it is discovered that the business owner obtained any asset, including money, by fraud, then the debt will not be dismissed by the court. 5. If the bankruptcy court finds out that the business owner has acted dishonestly, then it can refuse debt discharge. Example of dishonesty could be lying, falsifying records, destroying property or records, destroying assets, disobeying court orders, etc. 6. A business bankruptcy attorney would be able to assist you in a Chapter 7 business bankruptcy discharge only once in 8 years. 7. When the court discharges debts that are secured by an asset, like lien on an office building, it does not necessarily imply that the debt has to be paid in cash. The creditor holding the lien can then possess the asset and sell it off. 8. There are instances when the debtor may like to continue paying a debt even after the court has already discharged it. For instance, if a loan is obtained by the business owner to purchase a car, a Reaffirmation Agreement may be entered into by the owner and the lender, so as to allow the former to continue paying the debt, because he still needs to use the asset. This agreement is supervised by the court. These are a number of facts you must be mindful of before approaching or choosing from the best business bankruptcy lawyers.
_There was a time that bankruptcy was considered a very touchy topic. However, as time flies, people became more aware of what business bankruptcy means, especially Chapter 11, which pertains to reorganization of the business. When a business finds it difficult to meet its financial obligations, a bankruptcy is almost certainly to follow. The required interest for the loans that the business needs to pay usually eats up the company’s revenues, thereby leaving the company financially distressed. While there may be various business bankruptcy options available for a company, it is still important for a business to weigh these options first, before deciding on one. There is also a need for a bankruptcy attorney to be appointed by the company, one who is aware of the bankrupt laws that can be applied. In fact, bankruptcy lawyers can present the company with other feasible options, and not just bankruptcy. The following are the different business bankruptcy options that are available for financially constrained businesses: 1. Chapter 7 - Liquidation. If the business does not see any hope in the future because of an unprofitable product line or lack of assets or impossible debt, then it must file for protection under Chapter 7. Chapter 7 is ideal for sole proprietors and small businesses, where the name of the business is directly connected to the name of the owner or owners. In this type of bankruptcy, business assets are sold and the proceeds from the sale are used to compensate creditors. Once the proceedings are over, the company would not exist anymore. 2. Chapter 11 - Reorganization. This is opted for by companies with potentials but are hounded by debts. This allows a company to reorganize the structure and the manner by which it performs operations, hence giving more time to the company to pay up its debt. The company needs to submit a reorganization plan together with its petition for bankruptcy, which must be approved by its creditors. If creditors approve the reorganization plan, then the company must comply with the terms in the plan. When the creditors are paid and the plan has been executed fully, then the debts of the company are eliminated. 3. Chapter 13 - Wage Earner Plan. It is referred to as wage earner's bankruptcy, and a sole proprietor who has mixed up his personal assets in his business, so he can gradually repay his debts from his wages. This Chapter helps protect the personal assets of sole proprietors. 4. Chapter12 - Family Fishermen Bankruptcy. Farmers and fishermen can seek protection from their creditors under Chapter 12 bankruptcy. These are the various business bankruptcy alternatives that you can choose from. Businesses have to consider whether it would need liquidation or mere reorganization, take a look at secured debts, tally all their resources, and take time to ponder upon whether or not to hire a business bankruptcy lawyer to handle bankruptcy filing.
Individuals, creditors and businesses are protected by the bankruptcy law of the United States. Business bankruptcy laws facilitate and enable reorganization of debt to pay off creditors without the business being destroyed or the orderly liquidation of assets to pay off creditors and divide up a failing business for others to buy up parts of and try to make successful. These laws therefore protect businesses and their owners and operators as well as creditors, consumers, and the economy in general. The federal courts of the United States is the one that presides over bankruptcy cases. In 1978, the federal law established two types of bankruptcy namely, Chapter 7 and Chapter 11. There is also what is known as Chapter 13 bankruptcy, but incorporated businesses cannot file under that type. On the other hand, self-employed individuals could file under Chapter 13. For businesses, Chapter 7 would entail filing a petition for bankruptcy, then a court-appointed interim trustee would be in control of the business’ non-exempt assets and accounts. During the time that the appointed and temporary trustee would be in control of the business, he exercises a broad power over it. Finding unsecured financing, making managerial changes, and liquidating assets so as to pay off creditors while trying to keep the business from total failure are all within the scope of the trustee's powers. Therefore, for liquidation, a Chapter 7 bankruptcy is the ideal option. Chapter 11 is the bankruptcy option that has to do with reorganization. Under this option, the court oversees a flexible process by which the debtor business and its creditors work out payment arrangements to their mutual benefit and solution. The business' principals maintain control of the business and remain in possession of its assets. In court records, the business management team is the “debtor-in-possession”, or DIP, and there is no appointed trustee. However, if the creditors see that no viable solution is arrived at by the DIP, and that the assets are still mismanaged, they can petition the court to intervene and to appoint its own agent that will replace the DIP. For the federal court to do this intervention, it must be satisfied with evidence that the creditors are correct in their assessment of continued mismanagement. Businesses must file forms such as those documenting liabilities and assets with perfect accuracy and in the correct manner with the federal court. The business may lose its bankruptcy protection, and the business could be totally lost, if it fails to accurately and correctly file the forms needed. Hence, if you are the sole owner of a business or if you have partners in a business, and you have come to see that you may need to file for bankruptcy, then you must consult a bankruptcy lawyer. When the lawyer is working in this capacity with you, he would be put on file by the federal court as a “Debt Relief Agent”. If you own a business and you and any partners are considering filing for bankruptcy, consult a bankruptcy lawyer who has experience working with business owners.
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