We make the journey through Chapter 11 Bankruptcy easier
Is Chapter 11 bankruptcy the most viable option for you or your business? At S&B Legal, we reach out to save your financial future.
What is Chapter 11 Bankruptcy?
“Business bankruptcy” or “reorganization bankruptcy” avoids the complete liquidation of assets or a direct bankruptcy situation, such as Chapter 7.
Chapter 11 bankruptcy is a legal remedy that allows companies and individuals with large debts to reorganize and pay off.
How is it activated? It can be either voluntarily or involuntarily. However, the process involves a bankruptcy court, which must approve the debtor’s reorganization plan and look out for the interests of creditors.
Perhaps the greatest appeal of bankruptcy Chapter 11 is that the company or business will not have to close its doors or eliminate all its assets while paying off the debt. It will be able to continue operating and generating income, and if it meets the deadlines and the reorganization plan, it will achieve financial freedom.
Chapter 11 bankruptcy: who can benefit?
For individuals and companies overwhelmed by debt, they have the right to declare bankruptcy thanks to federal laws.
As an example, we can mention LATAM Airlines, who, in the midst of the COVID-19 pandemic, filed for Chapter 11 of the Bankruptcy Law to reorganize. The story ended with a happy ending in November 2022, when they overcame its bankruptcy situation.
The LATAM case shows us that it is almost always the large corporations that most benefit from declaring bankruptcy under Chapter 11, but this does not exempt small businesses, nor does it leave out corporations or individuals.
Requirements for Chapter 11 Bankruptcy
The truth is that this reorganization bankruptcy is available to companies of all sizes (corporations, partnerships, or sole proprietorships). However, its processes are very complex, and legal expenses are higher than those of other types of bankruptcy.
This blow to the pocketbook makes it so that large corporations are the ones that most frequently file for Chapter 11.
Nonetheless, the following can’t declare Chapter 11 bankruptcy:
- Government agencies
- Banks
- Non-commercial trusts
- Insurance companies
In addition to knowing the requirements, it is also essential to understand what the steps are to file for bankruptcy under Chapter 11 bankruptcy:
- Petition to the bankruptcy court: with information on the company’s assets, debts, and income.
- Automatic suspension of actions against the debtor is activated after the petition.
- Reorganization plan: the company has between four and 18 months to present it.
- Submit the reorganization plan: it must specify how the debts will be paid and when.
- Creditors vote on whether to accept or reject the plan.
- Court approval of the reorganization plan.
Advantages of Chapter 11 bankruptcy
- The company remains operational, generating income, and the debtor is in control of operations.
- The debtor does not need to sell all of their assets.
- The court may reduce the amount owed on unsecured debts.
- Storing the case prevents legal action by the creditor, such as seizure of assets.
- Courts may allow the debtor to obtain new financing.
- The debtor will not have direct contact with their creditors.
Disadvantages of Chapter 11 Bankruptcy
- Long and costly process and oversight of finances by the bankruptcy court
- Relinquishment of ownership of assets to creditors, at least partially
- If debt reorganization fails or the liquidation plan is not proven, Chapter 11 may become a Chapter 7 bankruptcy (direct bankruptcy in exchange for surrender of assets).
Support from Chapter 11 attorneys makes a big difference between success and failure of the process.
Contact S&B Legal for Chapter 11 Bankruptcy Advice
With S&B Legal by your side, you will successfully navigate the complexities of Chapter 11 bankruptcy with the guidance of our bankruptcy attorneys. They will enlighten you on the financial and legal consequences of Chapter 11 bankruptcy.
Request a free case evaluation now or call us at (323) 201-6055. Our experienced bankruptcy attorneys in Los Angeles, CA, will give you the best advice possible. Don’t risk making hasty decisions, your business depends on your choices.
