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What Chapter 11 Bankruptcy Does for West Palm Beach Businesses

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How did you feel when you heard that big businesses such as Toys R Us and Sears were filing for Chapter 11 bankruptcy? Many people are shocked and immediately think that because those businesses filed for bankruptcy, that they had no money and were going out of business. While it is possible for a business to close after filing bankruptcy, this is not always the case and is a common misperception. Chapter 11 bankruptcy can actually help businesses survive. Businesses that have successfully reorganized and are still around are General Motors, United Airlines, and Marvel Comics. This article explains how.

What is Chapter 11 Bankruptcy?

Chapter 11 bankruptcy allows a business to reorganize debts instead of starting over like people have the ability to do when filing for Chapter 7 bankruptcy. Many corporations were able to recover and be successful after restructuring their debts.

How Chapter 11 Bankruptcy Can Help Businesses Survive  

Chapter 11 bankruptcy can help your business survive in several ways by:

  • Stopping the Collection Efforts. When a business files for Chapter 11, collection attempts such as phone calls and letters from collection agencies are put to an end.
  • Maintaining Business Operations. A reorganization bankruptcy, as referred to by the United States Courts Bankruptcy Basics webpage, allows business owners to remain in control of the business operations, called a “Debtor-in-possession”. Your business can pay off its debts while staying in business.
  • Payment Flexibility. Business bankruptcy through Chapter 11 allows for payment flexibility. Businesses can make payment arrangements to pay debts over a period of time. A 10-year payment plan is an option.

Chapter 11 Does Not Guarantee Survival

Although a business files for bankruptcy and the plan of reorganization is approved, Chapter 11 does not guarantee the business will survive.  Certain statistics state that only about 10-15% of Chapter 11 cases successfully reorganize.

For example, Sears filed for bankruptcy over a year ago and it still has its struggles, according to an article in CNN.

Often times, businesses end up filing for Chapter 11 reorganization soon after the first bankruptcy is discharged. The CNN article lists other businesses that took the path to file Chapter 11 a second time prior to closing for good. This list includes

  • RadioShack
  • Payless
  • American Apparel

When Toys R Us filed two years ago, the business carried $4.9 billion in debt. $1.7 billion of that debt was due this year in 2019, according to a CNBC report.

While businesses can file for bankruptcy multiple times because filing for Chapter 11 reorganization is a voluntary process, this is not ideal and can be costly. Unfortunately, the reality is some businesses cannot liquidate, sell assets, and survive even after the bankruptcy process is complete or discharged.

If You’re Considering Chapter 11 Bankruptcy, Contact Our West Palm Beach Chapter 11 Bankruptcy Attorneys

If you’re interested in filing Chapter 11 bankruptcy for your business, contact Kelley, Fulton & Kaplan at 561-264-6850 for a consultation. Our West Palm Beach Chapter 11 bankruptcy attorneys will help you take the best route and walk with you as you navigate the process. We will be there to make sure you save your business and restructure your debts so you can remain in business and live your dream of being a business owner.

Resources:

cnn.com/2019/10/15/business/sears-outlook-bankruptcy-anniversary/index.html

cnbc.com/2017/09/18/toys-r-us-files-for-chapter-11-bankruptcy.html

https://www.kelleylawoffice.com/chapter-11-dos-and-donts-for-west-palm-beach-businesses/

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