When a business firm becomes insolvent, but would not want to cease operations, one legal means it can employ to save itself from overwhelming debts and regain control of its finances is Chapter 11 of the US Bankruptcy Code.
Insolvency puts any business firm’s existence at risk, but business owners should know that while they are legally bound to pay their creditors, the law can also save and protect them from being harassed by creditors and loan collectors, as well as allow them to design a scheme that will make settlement of debts more affordable. And, as stated above, one way is by seeking protection from Chapter 11 bankruptcy.
Majority of business firms shy away from Chapter 11, as much as possible, because it is complex, time-consuming, risky and very expensive; however, it is also the only bankruptcy chapter that will allow firms, with loan amounts exceeding the limit set in Chapter 13, to restructure their debt payment and continue operations at the same time.
Chapter 11 bankruptcy, also known as business bankruptcy, may be filed by limited liability companies, corporations, partnerships and sole proprietorships. Both small businesses and giant corporations can be eligible to seek protection from it.
This reorganization type of bankruptcy requires firms to design a payment plan, which the court will then approve. There are even instances when the court would reduce the firm’s liabilities, such as through the discharge of unsecured debts, to make payment easier and profitability, achieved faster.
Chapter 11 can also be considered a liquidation bankruptcy since the debtor or company can choose to sell some of its assets and properties, instead, to be able to pay its creditors. A debtor, however, who has already filed chapter 11 in the last 6 months or 180 days, wherein this application resulted in a dismissal or the debtor either failed to comply with the court’s mandates or failed to appear in court, is prohibited from filing another case.
It is necessary that businesses intending to file a Chapter 11 bankruptcy understand everything about this chapter, in particular, and about bankruptcy, in general. The website of Ryan Ruehle can provide debtors with the vital information that they need to know.