Important Information about Chapter 11 Bankruptcy
Difficult financial times can cause serious hardship for individuals and their family members. People may find themselves in crisis if they experience adverse life-events like divorce, loss of a supportive spouse, job-layoffs or firings, and other events that can have a serious effect on their income. If a person's income takes a serious hit or if their bills increase significantly, he or she may find it difficult to maintain regular payments on debts.
The same can often be said for businesses, which often depend on the market and consumer spending to keep revenue streams healthy. If a business experiences a significant drop in sales or clients, the company owner may find it difficult to repay creditors and keep the operation afloat. In some cases, businesses and individuals may choose to turn to Chapter 11 bankruptcy for protection against creditors and reorganization of their business structure.
The Austin bankruptcy lawyers of Slater, Kennon & Jameson would like to bring you the following information about Chapter 11 bankruptcy to help explain what it is, how it is used, and the process of filing for bankruptcy. If you have further questions regarding this type of bankruptcy, contact an experienced Austin bankruptcy attorney at 512-338-1100.
What is Chapter 11 Bankruptcy?
Chapter 11 bankruptcy is usually referred to as “reorganization bankruptcy” and it is usually used by corporations, small businesses, and sole proprietorships. Individual debtors may also file for Chapter 11 if they owe more than the maximum amount allowed by Chapter 13 bankruptcy. Individuals tend to choose Chapter 7 or Chapter 13 bankruptcy, and businesses are the main beneficiaries of the Chapter 11 process.
Chapter 11 bankruptcy often allows business owners to:
- Obtain an automatic stay to stop creditor harassment and collections
- Reach a mutual repayment agreement with their creditors
- Cancel some of the business’s unsecured debts, contracts, and leases
- Retain the company's assets and remain in operation
Business owners who opt for Chapter 11 bankruptcy are able to retain control of the operation of the company, revenue, and the flow of cash. Because the business owner retains control of the company through the bankruptcy process, Chapter 11 business bankruptcy is often referred to as a “debtor-in-possession” bankruptcy. Business owners who are considering filing for bankruptcy may wish to consult an experienced Austin bankruptcy lawyer to discuss their legal options.
Filing for Chapter 11 Bankruptcy
Business owners or individuals who file for Chapter 11 bankruptcy will typically have to file a petition and create an acceptable reorganization plan. Once the plan is submitted, the debtor typically must:
- Disclose all of the assets held by the business
- List all of the debts that the company is seeking protection from
- Meet with creditors to discuss a repayment plan and allow them to vote on the proposed plan
- Make the agreed payments and make sure that the plan is carefully followed
While Chapter 11 bankruptcy usually allows the business owner to retain control of the company and the cash-flow of the business, any actions that are deemed unlawful, fraudulent, or detrimental to the company may force the court to assign a trustee to oversee the business. If a court-appointed trustee is required, the business owner will have to relinquish control of the business decisions. For more information on the process of filing for Chapter 11 bankruptcy, contact an Austin bankruptcy lawyer today.
How Chapter 11 Bankruptcy May Help
Business owners who are struggling to repay creditors and keep the company running smoothly may benefit from Chapter 11 bankruptcy. Although the term “bankruptcy” often carries negative connotations in our society, filing for Chapter 11 may be the best way to keep your business afloat and regain proper standing with your lenders.
In some cases, the business owner will be able to maintain control of the company, make day-to-day decisions, and run the company as usual while going through the bankruptcy process. During Chapter 11 the company is allowed to continue with standard operations, but is not allowed to engage in large purchases, takeovers, sell-offs, or other major transactions.
For more information on Chapter 11 bankruptcy and your legal options, contact the Austin bankruptcy lawyers of Slater, Kennon & Jameson, LLP at 512-338-1100.