Chapter 11 bankruptcy can prove beneficial to businesses, individuals and the community. Without the ability to file a Chapter 11 bankruptcy, owners may not be able to sell their business, employees may lose their jobs, and contractual obligations may remain unfulfilled.
However, the Chapter 11 process is complex. It allows a company to restructure its organization while continuing its operations. Yet as one publication explains, this involves reconfiguring business debt. This involves working with creditors, and getting the bankruptcy trustee or judge to sign off on the bankruptcy filing.
The benefits of a Chapter 11 filing
Sometimes a Chapter 11 filing does mean liquidation of the business assets. This is not always the case, however.
There is a misconception that a Chapter 11 bankruptcy will mean the closing of your business. Instead, a restructuring can provide a way to pay creditors their debt. A business likely would not be able to keep its doors open without a means of dealing with such debt. Obviously, keeping the doors open will also allow employees to remain working.
Business owners may also express concerns that they will no longer be able to obtain credit or raise revenue after the filing. Owners need to understand that creditors will not provide financing to them until they can pay off older debt.
Chapter 11 requires the following of a certain protocol. A business and its attorney put together a plan on how the business will run successfully in the future. The business plan must also show that owners will not repeat past mistakes.
Filing for Chapter 11 successfully requires an attorney who will represent your interests in court. It includes presenting a plan acceptable to a judge used to seeing companies that are in financial trouble. It’s important therefore to retain an attorney with experience and knowledge of the Chapter 11 process.