Chapter 11 bankruptcy is typically reserved for businesses that are facing financial hardship. Your business could be a corporation, partnership, or limited liability company (LLC), and filing for Chapter 11 bankruptcy may provide the solution to cash flow problems that are impeding the continued operation of the business. However, individuals may also file a Chapter 11 case.
In simple terms, when you have a lot of stuff but no money, Chapter 11 is designed to help your business continue to operate through reorganization of operations, assets, or finances. The reality is, however, that Chapter 11 bankruptcy is complex and often expensive and is not an option to be taken lightly.
Continued Business Operation
Some of the world’s largest corporations have filed for Chapter 11 bankruptcy in order to ensure continued operation of the business. In some cases, this takes the form of the debtor continuing to run the business as what’s known as “a debtor in possession.” Certain circumstances, including where there is fraud or mismanagement of the business involved, may result in a court appointed trustee running the business instead.
Partial Payment of Unsecured Debts
Filing for Chapter 11 bankruptcy may allow you to make partial payments to creditors. This allows the business to continue to operate without being crippled by debt. This may involve having interest rates adjusted so debt is reduced across the board. The business may also pay out less on a monthly basis on debts such as loans or equipment purchases and other secured debts.
A temporary deferral of obligations incurred pre-petition applies to debts such as rent or installments. Chapter 11 bankruptcy facilitates this type of deferral so businesses that qualify are given breathing room to bring other payments up to date. This is a complex area of Chapter 11 law and should be discussed in further detail with an experienced bankruptcy lawyer.
There is the possibility the debtor will have the option of rejecting certain contracts in a Chapter 11 bankruptcy case. As a business, this gives you the opportunity to choose equipment leases, real estate leases, and other long-term contracts that are beneficial to the continued operation of the business under ideal economical conditions. The ultimate goal of this aspect of a Chapter 11 is making sure the business remains profitable going forward.
Extend Payment of Tax Debts
Debtors are able to extend payment of pre-petition tax debt for a period of up to five years when filing for Chapter 11 bankruptcy. Taking advantage of this element of a Chapter 11 has obvious benefits for a business. If this is an attractive proposition for maintaining a profitable business, consulting with a bankruptcy lawyer will help you make the final call.
H. Lehman Franklin P.C.
There are a number of factors for a business to consider when it comes to filing for Chapter 11 bankruptcy. H. Lehman Franklin P.C. has experience in providing business debtors with excellence in advice on reorganization of finances.
Call our offices today on 912-764-9616 or via email at firstname.lastname@example.org. We are here to support you in keeping your business afloat through financial difficulties.