If you own an incorporated business and you need to ask for business bankruptcy protection, two options that you may be considering are Chapter 11 and Chapter 7 bankruptcy. If you choose to file for a Chapter 7 business bankruptcy, the federal court presiding over your petition will appoint a trustee who shall be deemed as the temporary owner of your business and assets. You will be made to sit on the sidelines while this trustee decides what management to fire, what new management to hire, how to repay your creditors with your assets, how the business can be better structured and operated, and so on. Chapter 7 business bankruptcy filing may be your best option (or even your only viable option), depending on your circumstances. Yes, it is still something that is there for your protection and the protection of your creditors. There are certain businesses however, that opt to seek for business bankruptcy protection under Chapter 11.
Chapter 11 business bankruptcy filing allows you to retain command and control over your business operations and business assets. In this type of bankruptcy, the court stipulates that your management team will be considered as “debtor-in possession”, otherwise known as DIP. This DIP acts as an agent that negotiates agreeable payment plans with your creditors. These payment plans may mean periodic partial payments until a debt is paid off to some creditors, while other creditors may agree to take a lesser amount than what is owed to them in exchange for ceasing all legal collection attempts against you. The DIP functions in the capacity of a court appointed trustee, except that it comes from within your own organization and no-one is appointed by the court. The DIP is going to have the business' best interests in mind, whereas a court appointed trustee cares more about paying off creditors.
While Chapter 7 business bankruptcy dwells more on liquidation, Chapter 11 is mainly about restructuring. This means that the operations and composition of your business get changed around so that debts can be paid in a timely manner while the business continues to operate and grow. This may necessitate you to lay off workers, either permanently or temporarily, and may even warrant you to excise one entire department. The DIP will be the one who will oversee the whole process and ascertain what caused the inefficiencies among the company, which eventually resulted to the inability to pay up creditors in a timely manner, and will make sure that those responsible for such inefficiencies are eliminated. The federal court presiding over your Chapter 11 business bankruptcy petition will necessitate you and your creditors to make periodic progress reports regarding the whole process.
In the event that some or all of your creditors remain unhappy with the actions of your DIP, they can petition the court to replace the DIP with its own appointed agent. This is not at all to your business' advantage. Because of this, it is just proper for you to hire an attorney who has the expertise in business bankruptcy law if you are considering filing for Chapter 11. His title will be “Debt Relief Agent”. Your lawyer can give the proper advice to your DIP, and will be able to negotiate with creditors. That way, filing for Chapter 11 business bankruptcy would not result to your business’ destruction.
If your business needs bankruptcy protection, first seek the advice of a bankruptcy lawyer who can advise you on which filing option would be better for you. Likewise, you might also find an alternate solution to filing bankruptcy. Filing for business bankruptcy should be regarded as a last resort when searching for ways to save your business.
Chapter 11 business bankruptcy filing allows you to retain command and control over your business operations and business assets. In this type of bankruptcy, the court stipulates that your management team will be considered as “debtor-in possession”, otherwise known as DIP. This DIP acts as an agent that negotiates agreeable payment plans with your creditors. These payment plans may mean periodic partial payments until a debt is paid off to some creditors, while other creditors may agree to take a lesser amount than what is owed to them in exchange for ceasing all legal collection attempts against you. The DIP functions in the capacity of a court appointed trustee, except that it comes from within your own organization and no-one is appointed by the court. The DIP is going to have the business' best interests in mind, whereas a court appointed trustee cares more about paying off creditors.
While Chapter 7 business bankruptcy dwells more on liquidation, Chapter 11 is mainly about restructuring. This means that the operations and composition of your business get changed around so that debts can be paid in a timely manner while the business continues to operate and grow. This may necessitate you to lay off workers, either permanently or temporarily, and may even warrant you to excise one entire department. The DIP will be the one who will oversee the whole process and ascertain what caused the inefficiencies among the company, which eventually resulted to the inability to pay up creditors in a timely manner, and will make sure that those responsible for such inefficiencies are eliminated. The federal court presiding over your Chapter 11 business bankruptcy petition will necessitate you and your creditors to make periodic progress reports regarding the whole process.
In the event that some or all of your creditors remain unhappy with the actions of your DIP, they can petition the court to replace the DIP with its own appointed agent. This is not at all to your business' advantage. Because of this, it is just proper for you to hire an attorney who has the expertise in business bankruptcy law if you are considering filing for Chapter 11. His title will be “Debt Relief Agent”. Your lawyer can give the proper advice to your DIP, and will be able to negotiate with creditors. That way, filing for Chapter 11 business bankruptcy would not result to your business’ destruction.
If your business needs bankruptcy protection, first seek the advice of a bankruptcy lawyer who can advise you on which filing option would be better for you. Likewise, you might also find an alternate solution to filing bankruptcy. Filing for business bankruptcy should be regarded as a last resort when searching for ways to save your business.
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