Chapter 11 Bankruptcy
When a business is in debt but the owners or managers believe that they can turn the company around if given enough time, they may consider filing a Chapter 11 Bankruptcy. Under Chapter 11 of the U.S. Bankruptcy Code, businesses can “reorganize,” buying time to pay creditors as the company generates revenue and restructures how they do business. When a company in debt files for bankruptcy protection, the company must file:
- A list of assets and liabilities
- A current income statement that includes revenues and expenses
- A list of contracts and unexpired leases
In Chapter 11 Bankruptcy, the debtor comes up with a reorganization plan. Creditors can also propose a plan for reorganization. The plan needs to be voted on for approval by the creditors. If it is not, then the court will not confirm the plan and the bankruptcy could be converted to a Chapter 7, which will liquidate the assets. But Chapter 11 Bankruptcy often makes sense when a viable business can generate more income to pay off debts through reorganization than it could by liquidating assets.
Businesses continue to operate during a Chapter 11 Bankruptcy. And many companies have emerged from Chapter 11 to continue as strong and viable businesses ready for growth and expansion after a bankruptcy reorganization.
Chapter 11 Bankruptcy is a serious step and getting creditors to agree to accept the terms can be difficult. But, for many companies that have good growth potential, Chapter 11 can provide a fresh start. If the reorganization fails, liquidation is always an option and the Chapter 11 Bankruptcy can be converted to a Chapter 7 Bankruptcy.
In order to file a Chapter 11 Bankruptcy the company owners need legal assistance. Even for a small business, this is not a matter that can be handled without an attorney. A qualified Miami Bankruptcy Attorney can advise you and your business on the best course of action.