Understanding Chapter 11 Bankruptcy
If your business is struggling to repay debts but you do not want to close your business or liquidate its assets, Chapter 11 bankruptcy could be a beneficial option for your company. Chapter 11 bankruptcy is a type of bankruptcy that is available to businesses and individuals alike, although it is most commonly filed by businesses. In most cases, individuals will only file for Chapter 11 bankruptcy if they have an amount of secured or unsecured debt that renders them ineligible for Chapter 13 bankruptcy. If you are considering Chapter 11 bankruptcy for your business, our West Palm Beach Chapter 11 bankruptcy lawyers have information to help you.
Chapter 11 is a Type of Reorganization Bankruptcy
Unlike Chapter 7 bankruptcy, which requires businesses to close and for business assets to be liquidated in order to repay creditors, Chapter 11 bankruptcy is a type of reorganization bankruptcy under the U.S. Bankruptcy Code. In a reorganization bankruptcy, a business can seek bankruptcy protection while remaining open. The Chapter 11 bankruptcy process allows the business to remain in possession while developing a repayment plan to get back on track with business debts. Once the business submits its reorganization plan, creditors have the ability to vote on the plan if it will affect them. Once creditors vote on the reorganization or repayment plan, the court can confirm the plan.
In some types of Chapter 11 cases filed under Subchapter V, creditor consent may not be necessary for the court to approve the repayment plan. The length of the repayment plan will depend upon the particular circumstances of the debtor, but plans typically last from two to five years.
Information Required for a Chapter 11 Bankruptcy Case
How does a Chapter 11 bankruptcy get underway? In addition to filing a petition for Chapter 11 bankruptcy, the debtor business also must file a variety of documents with the court that include:
- Schedules of business assets and liabilities;
- Schedule of current business income and expenditures;
- Schedule of executory contracts and unexpired leases; and
- Statement of financial affairs.
These materials are required for a business seeking bankruptcy protection. If an individual or a married couple files for Chapter 11 bankruptcy, additional materials must be submitted to the court with the bankruptcy petition, including a certificate of credit counseling and information about monthly income.
Once the reorganization plan is confirmed, the debtor will be required to make regular payments according to the terms of that reorganization plan. During the reorganization plan, the debtor can catch up on payments owed to creditors and, for businesses, can keep the company open.
Benefits of Chapter 11 Bankruptcy for Business Owners in West Palm Beach
Chapter 11 bankruptcy is often a preferred type of bankruptcy for business owners who want to continue running the business while reorganizing debts. As long as the business appears to be capable of making a profit and allowing the business owner(s) to repay debts according to the terms of the reorganization plan, a Chapter 11 bankruptcy can allow the business to become solvent.
If a business ultimately cannot meet the terms of a Chapter 11 reorganization plan, it may be able to convert to a Chapter 7 bankruptcy case, but it will be necessary to close the business in order to do so.
Seek Advice from a Bankruptcy Lawyer in West Palm Beach
If you have questions or concerns about Chapter 11 bankruptcy in Florida, one of our West Palm Beach bankruptcy attorneys can provide you with more information. Contact Kelley, Fulton & Kaplan to learn more about how we can assist you.