didn't think that I could save my business from Chapter 11 Bankrutpcy,
but I did ... here's how.
With Chapter 11 bankruptcy, the owner reorganizes the business so
it can gain relief from creditors. Then the owner, with the help
of the court and its creditors, comes up with a strategy to pay its
debts. Sometimes the judge even reduces the debt. In Chapter 11 bankruptcy,
the business continues to run. The intent is to help the company
make a new start.
Business Operations under Chapter 11
Although the business continues to function, the business owner
loses some control. The court now oversees the business restructuring
and all future business decisions. And the owner, with the stockholders,
must negotiate a plan to repay the creditors. Most of these creditors
When the assets of a business are less than $200,000, the court
considers the company to be a small business. In this case, the judge
can remove the creditors from the committee that plans the repayment
of the debts. Smaller businesses can move through Chapter 11 bankruptcy
more quickly but they often have a tougher time surviving the process.
The Bankruptcy Process
Once the owner files Chapter 11 bankruptcy, there is an automatic
stay. This means the creditors can no longer badger the business
for accounts payable. They now must go through the court. It is the
responsibility of the business to continue running so it can eventually
turn a profit.
Once the court sets the automatic stay, the creditors form a committee.
The court assigns a trustee to the business and he or she appoints
members to the creditors' committee. The members of this committee
are usually those creditors who have the largest secured debts. The
committee can investigate for fraud and participate in the plans
to pay back debt. It can also hire attorneys and oversee some of
the owner's business operations.
The owner has 120 days to come up with a plan to repay debts and
to present that plan to the bankruptcy court. The creditors must
approve the plan during the first 180 days. If the owner does not
put in a plan or if the creditors cannot approve it then the creditors
suggest an alternate plan. The court always has the final say.
The plan explains who the business will pay back first. Secured
creditors always get the first cut. After that, the bondholders get
their money. Finally the business pays the employees and then the
stockholders if there is anything left. Often the employees and stockholders
In the end, a business files Chapter 11 bankruptcy in hopes of becoming
profitable again. This does not always work. With many small business,
the owner ends up filing under Chapter 7. This means a total liquidation
of the business payoff the creditors. Thus, the business must shut
its doors forever.
to save your business from closure and bankruptcy