What To Expect In A Chapter 11 Bankruptcy For Businesses
Chapter 11 bankruptcy is a type of reorganization bankruptcy, and it is commonly used by businesses. If your business is considering filing for Chapter 11 bankruptcy in order to reorganize debts while keeping your business open, you are likely wondering what to expect in the bankruptcy process. Chapter 11 bankruptcy cases are complicated, and it is important to work with a West Palm Beach bankruptcy lawyer on your case to ensure that you meet all requirements. In the meantime, the following are some of the steps involved in a Chapter 11 bankruptcy to help you understand what to expect.
Petition for Chapter 11 Bankruptcy
The first step in any Chapter 11 bankruptcy case is to file a petition with the bankruptcy court. In the case of Chapter 11 bankruptcies, the petition can be either voluntary or involuntary. A voluntary Chapter 11 bankruptcy is filed by the debtor, while an involuntary Chapter 11 case is filed by the creditors. With the petition, you will need to include schedules of assets and liability for your business, a schedule of your current business income and expenditures, a schedule of executory contracts and unexpired leases, and a statement of financial affairs. You will also include basic information in a voluntary petition such as name, tax identification number, location of your business’s principal assets, and other related details.
In addition to the documents that must be filed with a Chapter 11 petition, you must also pay a case filing fee of $1,167 and a miscellaneous administrative fee of $571.
Automatic Stay Stops Collection Actions
As soon as the Chapter 11 bankruptcy petition is filed, like in other types of bankruptcy cases, the automatic stay will stop any collection actions and any legal steps by creditors or debt collectors. This includes attempts to repossess any business property. Since Chapter 11 is a type of reorganization bankruptcy, the automatic stay also allows business to become current with creditors.
File a Written Disclosure Statement and Plan of Reorganization
You will then need to file a written disclosure statement, along with a plan of reorganization. The reorganization plan will need to specify the debts your businesses owe, how your business will repay those debts over a set period of time, and how much creditors will ultimately receive of the amount you owe. Creditors who will not be paid the full amount of debt owed under the plan are known as “impaired creditors,” and they will get a chance to vote on the reorganization plan.
Business Becomes Debtor in Possession
In most Chapter 11 cases, the business will be the debtor in possession and will handle the functions that are usually performed by a bankruptcy trustee. During that time, the business will continue to operate. In limited cases, a trustee may be appointed.
These are the overarching parts of the Chapter 11 bankruptcy process after a business files for bankruptcy, but the Chapter 11 process also involves additional complicated and intricate steps depending upon the facts of the bankruptcy case.
Contact a West Palm Beach Bankruptcy Attorney
If you have questions about filing for Chapter 11 bankruptcy, you should contact one of the experienced West Palm Beach Chapter 11 bankruptcy lawyers at Kelley, Fulton, Kaplan & Eller for assistance.