Long Island Small Business Bankruptcy Attorney
Chapter 11 Bankruptcy is primarily for debt-laden businesses who wish to remain in operation by reorganizing their financial affairs. Businesses who wish to close down would file under Chapter 7.
In addition, consumers who are considering Chapter 13, but have a very large amount of debt, do not qualify for Chapter 13, and instead must instead file for Chapter 11 relief. If you are an individual consumer, and your unsecured debts are more than $336,900, or your secured debts are more than $1,010,650, then the only payment plan bankruptcy you can file is Chapter 11.
Chapter 11 allows the corporate debtor to continue business operations by means of a plan of reorganization, rather than undergoing a Chapter 7 liquidation.
Chapter 11 is unique in that the debtor remains in possession of all its assets and its ongoing business. In other words, the debtor itself (or himself) is the trustee for the bankruptcy estate. While this is a great advantage, there are many fiduciary responsibilities. Chapter 11 is by far the most complex of all of the various bankruptcy chapters.
Legislative Reasoning for the Chapter 11 Program
By enacting Chapter 11, Congress gave businesses a chance to restructure their finances so that they may continue to operate, provide its employees with jobs, pay its creditors, and produce a return for its stockholders. Because Chapter 11 envisions an ongoing business, the most likely persons to have knowledge of the operation and details of the business are the existing management who normally continue operations during the Chapter 11 process.
A major rationale for business reorganizations is that the value of a business as an ongoing concern is greater than it would be if its assets were sold. When a business develops financial difficulties, such as not being able to pay its creditors due to cash flow problems, it may consider filing a Chapter 11 bankruptcy. If the business can extend or reduce its debts, or drastically lower its operating costs, it often can be returned to a viable state. Generally, it is more economically efficient to reorganize than to liquidate, because doing so preserves jobs and assets. Cooperation among the various interests, however, is crucial to a successful reorganization.
The Chapter 11 Plan of Reorganization
The ultimate purpose of a Chapter 11 case is to get a Plan of Reorganization confirmed by the court. The Plan is basically a contract with one's creditors as to how they will be repaid, and from what source. The creditors have to vote for the Plan in certain numbers, or if they do not vote in sufficient numbers for the Plan, they may be forced to accept the Plan if other requirements are met. There are many ways to formulate a Plan, subject to the requirements and limitations of the Bankruptcy Code.
Chapter 11 is time consuming and administratively involved. Monthly reports must be filed with the court and the U.S. Trustee's Office. Also, often there is litigation associated with any Chapter 11 case.
Craig D. Robins, Esq. has represented numerous debtors in Long Island Chapter 11 Bankruptcy cases, ranging from small businesses to multi-million dollar operations. If you feel that your financial situation may call for Chapter 11 protection, call Craig D. Robins, Esq. today for a free consultation.