Especially today, many businesses find themselves in the red and need a way to take a breath from their creditors and get their companies back on a solid financial track. This is where a bankruptcy law firm can help.
By taking advantage of filing a Chapter 11 business bankruptcy, your business may declare bankruptcy but continue to operate under supervision. This legal process is generally called “reorganization” because the process reorganizes your business debt and makes your business more efficient. This gives you the latitude you need, while allowing you to pay your creditors. It’s a lot like getting a financial reboot for your business and restarts it on a much stronger financial base.
This legal maneuver can be used for any type of business, such as a sole proprietorship, corporation, or limited liability company (LLC). Chapter 11 bankruptcy may be your best choice if you have a realistic chance of turning things around and getting back in the black.
Showing that your business has had a financial setback but is still viable will be critical for the courts to grant a Chapter 11 bankruptcy. You will essentially reorganize your company but continue in business under a court-appointed trustee. Your company would file a detailed plan of reorganization, outlining exactly how you will deal with your creditors. The company may be allowed to terminate contracts and leases, recover assets, and repay a portion of its debts while discharging others. By using this financial reorganization, you can move your business forward and will be able to return to profitability.
This plan is presented to your creditors and usually will be voted on by them. If the court goes over all the details and finds the plan is fair and equitable, it will be approved.
This type of reorganization may pay your creditors over a significant amount of time and is exceedingly complex. Legal proceedings may also take a year or more to confirm and finalize.
You have worked diligently and tirelessly to make your business a success, but hard times may hit (such as a pandemic) that could mean the end of all you’ve worked for. Don’t let that happen.
You and your Oklahoma City bankruptcy attorney will go over all the details and make the proper decision as to whether Chapter 11 is right for your business. This reorganization is your legal right and if you follow the plan that you, your Oklahoma bankruptcy attorneys, and the courts work out, you should be able to get back on solid financial ground.
Why Does Chapter 11 Take So Long to Confirm, and Can I Expedite It?
When your business needs help, it is sometimes hard to take the time needed to go through this lengthy and complex process. In 2019, congress passed the Small Business Reorganization Act, which tried to significantly simplify Chapter 11 bankruptcy for the average small business. They successfully enacted a new subchapter of Chapter 11 bankruptcy, designated as Chapter V.
This new subchapter is less stringent and seems to favor the side of the applicant for business bankruptcy; however, it only applies if you, as the applicant, want it to apply.
There are various positive differences to using Subchapter V, and your bankruptcy lawyers will make sure that you understand them all and that you agree it would work for you. As an example, Subchapter V does not require that a committee of creditors be appointed or that they must approve the court’s plan. This difference alone may make it beneficial to use Subchapter V.
In other words, Subchapter V provided business owners with a more streamlined option to get their business profitable and growing again, using a significantly shorter process.
Your small business does have to qualify for the new Subchapter V process, but you’ll gain much shorter deadlines for completing the process and significant flexibility in negotiating with creditors. This new plan also provides the debtor companies a private trustee to help facilitate consensus on the reorganization plan.
It’s imperative to note that only by giving your Oklahoma City bankruptcy lawyer all the details and having a well-presented financial plan for moving forward will the courts approve it. Chapter 11 is designed to help you, but you must be able to show that your business still has the ability and the vitality to once again be profitable. If this cannot be adequately shown, your Chapter 11 bankruptcy lawyer may have other options for you.
What Is the Process for Filing a Chapter 11 Bankruptcy, and What Can I Expect?
The entire bankruptcy process must begin with you meeting with an Oklahoma bankruptcy attorney. By doing so, you can both agree rationally on which form of bankruptcy is best for you and your business. You do have other options and only the specific financial options of your business will dictate how you should proceed.
In filing Chapter 11, filing a petition with the court is the beginning of the bankruptcy process. In this case, the petition includes an intent to file a detailed plan for the reorganization of your business. Usually, your business will be assigned a trustee, who will guide you through the entire reorganization process.
Most of the time, your lawyer will request that an automatic stay be set in place at the very beginning of the Chapter 11 proceeding. This stay (referred to as an injunction) prevents judgments, collection activities, foreclosures, and repossessions against the business during the formal bankruptcy process. This stay is invaluable, since it gives you and your business debtor a breather and allows time for negotiations on the company’s behalf to successfully resolve your financial difficulties.
Lastly, understand that the bankruptcy process, overall, is detailed and multifaceted. Only an Oklahoma bankruptcy attorney can thoroughly diagnose the details and make sure proceeding with Chapter 11 bankruptcy is optimal for you. If not, there are other options your lawyer will explain.
As involved as it sounds and is, by filing Chapter 11, you and your business have an excellent chance of overcoming your current difficulties and looking forward to a bright future!