Chapter 11 Bankruptcy is applicable for individuals and corporations who owe too much money for “lower” chapters (7 and 13). Being overburdened by debts those individuals and entities are still willing and (more importantly) able to pay to creditors but need certain debt’s restructure and adjustment of terms.
It’s not really easy to succeed in filing for bankruptcy Chapter 11, but when approved, your bankruptcy case brings significant advantages and it greatly contributes into your business/financial state revival.
So, what is Chapter 11 bankruptcy and how does it work? We’ll try to give the detailed view on all the advantages and difficulties Chapter 11 is related to.
Like its “younger” brother Chapter 13, eleventh chapter is also quite expensive due to many fees, the lawyer’s payments and the cost of the filing itself (the fee varies depending on the state and district). Chapter 11 also allows keeping affairs on surface instead of having you drown by total assets sell out, like Chapter 7 does.
The steps are following:
- Get a consultation from your local bankruptcy lawyer. This is needed to make sure your financial obligations and current situation with assets qualifies Chapter 11 bankruptcy.
- File the petition. If it comes to the commercial organization, all assets, loans, list of creditors and contracts must be included.
- Not later than 120 days after filing for bankruptcy Chapter 11 has started, you should develop and deliver to the court the reorganization plan. You should convince the bankruptcy court that the debts modifications and adjustments you’ve made are appropriate for the situation and the company will be able to generate the profit and pay the debts in a future.
- This is the key step where the bankruptcy court should say its final word. Depending on its “yes” or “no” (regarding your reorganization plan), the bankruptcy case either approved or denied. This is the stage where the assistance of professional bankruptcy lawyer is strongly recommended.
Any creditor who is willing to be presented at the court during reorganization plan hearing may ask questions about the plan and you should be able to provide the creditor and the judge with the clear, reasonable explanation. It’s important to understand, if your creditors reject the plan, the court will follow their objections.
It may seem as a complication but in fact, this is a great opportunity to negotiate with the creditors and get the flexible terms. When successful, it results in many benefits: company: paying the core of the debt (the value of collateral) instead of the loan and paying less on unsecured debts to restore the commercial profitability of the entity.
As it became clear the key role in your successful filing for bankruptcy Chapter 11 plays correct documentation. Your lawyer must be absolutely certain about the accuracy of all provided data. The paperwork should give the court the entire picture about the assets you have, amount of money you owe, the list of your creditors and all your expenses you’ve made lately. Collections letters should be attached as well.
In any case, self representing in the bankruptcy court during your filing and hearing is not the smart option. Statistically, the main reason of failures is an incorrect paperwork. It’s obvious, that saving some money by neglecting the service of and attorney may cost you times more if your petition denied and all fees are already paid.