There Are Strategies On How You Can Avoid Filing For A Chapter 11 Business Bankruptcy

Chapter 11 bankruptcy is usually called as business reorganization. It offers a business more time to repay its debts. In this course of action, the business needs to submit to the bankruptcy court, a debt consolidation plan, which needs to be accepted by majority of the creditors, which would then be carried out by the business to the letter. If a business requires reorganization, and if its owner doesn’t want to file for Chapter 11 bankruptcy, then he can think about an out-of-court negotiation in lieu of business bankruptcy. Here’s what an out-of-court settlement entails:

1. An out-of-court deal can only work if the business is serious and the creditors are willing. If there are two or three creditors who aren’t taking part, it is already enough to kill the negotiation.

2. Before contacting creditors, the business owner must first make a plan that shows how creditors will be paid back by using cash flow, new loans and issue of equity to interested parties. This means that the business owner must make sure that his business is sustainable enough to generate cash flow, attract investment and obtain loans to pay off existing creditors. The plan must be solid and should conclusively prove how the business will turn around and repay its debts. The business owner should seek the services of a reputed and experienced financial adviser to draft the plan.

3. One of the best ways to finish the out-of-court settlement is to look for a creditor that will be a replacement. But, that could be hard if the owner is facing business bankruptcy in the first place. A replacement creditor comes with costs and strings attached, so every business owner must be cautious.

4. The next step is to employ an attorney who’s reputed and experienced in negotiating with creditors. A lawyer who represents business owners in Chapter 11 business bankruptcy cases should be skillful enough to deal with creditors.

5. The hardest part is the next step, which is the actual negotiation with creditors. There are different kinds of creditors - priority, secured, semi-secured and unsecured. Each class of creditors must be satisfied. The business owner must realize that any of the creditors can hit the panic button during the negotiations. Lawyers basically negotiate on a one-to-one basis with secured creditors, and they secure forbearance agreements. The moment it is in place, it now becomes less difficult to negotiate with unsecured creditors. A meeting of unsecured creditors is called and facts are placed before them along with the restructuring plan. They are informed of the consequences of a Chapter 11 or Chapter 7 bankruptcy. The unsecured creditors are requested to lessen their debt and take a one time settlement, or make it possible for more repayment time.

6. An out-of-court settlement can work as well as a Chapter 11 business bankruptcy. However, the biggest drawback to such deals is that these are not binding. In a Chapter 11 business bankruptcy, the court officially stops creditors from making collection attempts or filing lawsuits. No such protection come built into out-of-court agreements.

Filing For Business Bankruptcy Can Be A Daunting Task

Business bankruptcy can present itself as an easy way out for businesses that are enormously weighed down by financial obligations, but business bankruptcy isn't as simple as it might appear. You have got to assess whether your business has a good future or not. If you think that your company does not have any future, then you may choose to file for bankruptcy under Chapter 7, which will assist you in liquidating the company. However, if you can see some light at the tunnel's end, you may prefer to file for business bankruptcy under Chapter 11, which will help reorganize the company. Prior to filing a bankruptcy, consider and prepare for the following:

1. You need to submit your fiscal reports along with your business bankruptcy petition. Therefore, it is a good idea to keep tax records, financial statements, and record of agreements and contingent liabilities ready. The list of agreements should also include details of contracts that have been gotten into but not yet performed.

2. The legal counsel plays an important role in a Chapter 11 business bankruptcy and it's crucial to work with a reputed attorney who is specifically experienced in representing debtor-clients filing a petition for Chapter 11 business bankruptcy. Working with a lawyer who is an expert at representing creditors may not work. Working with an attorney who specializes in Chapter 7 petitions also may not be ideal. Hence, it is recommended that you choose a lawyer with care. Chapter 11 business bankruptcy is awfully specialized and consumes a lot of time and entails skillful negotiation with creditors. Only an expert and Chapter 11 savvy lawyer can certainly deal with such tasks.

3. Are you a farmer who’s suffering from debt problems? If your answer is yes, then it is highly recommended that you file for bankruptcy under Chapter 12. Do you earn a salary or a sole proprietor? If yes, consider Chapter 13 bankruptcy, which is more popularly known as wage earner’s bankruptcy. These bankruptcies are simpler and easier compared to a  Chapter 11.

4. You must always be truthful with your lawyer. Disclose all material and immaterial money affairs and situations which pulled you into the debt in the first place. These details will assist your case. Reveal your priority debts like support for child, spousal support, employee benefits, taxes due, etc. Talk about your creditors as well and categorize them into semi-secured, fully secured, unsecured, financial obligations from family members or subsidiary companies, etc.

5. If you’ve filed a petition for bankruptcy based on Chapter 11, the bankruptcy court will require you to operate as the case trustee (barring a variety of fraud cases) and function as a debtor in possession. A panel of creditors will be appointed and you will be required to put forward a reorganization plan to the bankruptcy court. The panel of creditors will then vote on your reorganization plan and if it is accepted, the court will affirm it. Once the reorganization plan is agreed upon, you must accomplish it as per its stipulations. Even moderate deviations from the plan may be viewed as a breach of agreement, and if this happens, the bankruptcy proceeding can fail.

Filing a business bankruptcy may appear simple, but is more complicated than you could ever imagine. Get hold of a lawyer who is an authority in your kind of bankruptcy before making your first move. Best of luck.

A Business Bankruptcy Petition Should Be Prepared Carefully

Business bankruptcy may appear to be an easy way out for businesses that are heavily weighed down by debt, but bankruptcy is not as simple as it may seem. You must determine whether your business has a future or not. If your business does not have any future, then you may opt to file for bankruptcy under Chapter 7, which will help liquidate the business. However, if you can see some light at the end of the tunnel, you may prefer to file for bankruptcy under Chapter 11, which will help reorganize the business. Consider contemplating on and preparing the following before you file for business bankruptcy:

1. Keep your financial statements, tax records, and a list of contracts (executed and under execution) ready. These have to be filed along with the petition.

2. When you are planning to file for business bankruptcy, you need to have an attorney who is considered as an expert on the type of bankruptcy that you would be filing for. For example, if you are looking for protection under Chapter 11, it’s best not to work with an attorney who specializes in Chapter 7 bankruptcies. This is because under Chapter 11 bankruptcy, you must adeptly present your case to creditors and an attorney who specializes in Chapter 7 bankruptcy may not be good at it. Chapter 7 bankruptcy on the other hand, is very simple and blunt, your business must be liquidated and so the court will help you liquidate it. Reorganization under Chapter 11 bankruptcy would require discussions between you and your creditors, which would be more complex as compared to liquidation.

3. If you’re a farmer, you can file for protection under Chapter 12 and if you’re a sole proprietor and a wage earner, you can prefer filing business bankruptcy under Chapter 13, which is known as wage earners’ bankruptcy.

4. It is essential that you will be honest with your lawyer, and inform him about the littlest financial detail that will support the bankruptcy case. Let him know about those things that are classified as priority debts which consist of employee benefits, child support, alimony, etc. Also, talk about the number and nature of creditors for example, fully secured creditors, partially secured creditors, unsecured creditors, etc.

5. If you would be going for a Chapter 11 bankruptcy, you will be obligated by the court to be the case trustee (except of course in cases of fraud), and you will then become a debtor in possession. A committee of creditors will be designated and you will be required to submit a reorganization plan to the court. If the committee of creditors approves of the reorganization plan you presented, then the court will give its affirmation. If you have opted for filing business bankruptcy under Chapter 7, you will have to provide a list of your non-exempt assets to the court, which will then dispose them and divide the earnings among your creditors in order of their priority.

Filing a business bankruptcy may appear simple, but is more complex than you can ever imagine. Get hold of a lawyer who specializes in your type of bankruptcy before making a move. Good luck.

Small businesses very rarely think about bankruptcy unless serious difficulties exist. If your organization has fallen behind with creditors and you are thinking about chapter 11 bankruptcy, there are other choices including business debt consolidation or debt management. Consider all possible choices before declaring business bankruptcy.

Don’t Be Daunted By Those Business Bankruptcy Facts And Figures

The main reason most businesses file for a bankruptcy is because they either need more time to pay their debts or they desire to close up shop for a variety of reasons (unprofitable products, impossible-to-repay debt). Businesses hire bankruptcy attorneys to take charge of the bankruptcy process, which could fall either under Chapter 7 or Chapter 11. Chapter 7 denotes liquidation, while Chapter 11 denotes reorganization. When the entire business bankruptcy process is through, the business becomes free of debts. Here are a few facts that you should know about business bankruptcy:

1. There are debts that fall under priority debts. You cannot just avoid paying these debts or pay them in parts. The business owners are personally liable for debts like taxes, alimony, child support, student loans, court fines or penalties, criminal penalties imposed by the law, debts on account of injuries caused to others while driving under the influence of alcohol or drugs. The best business bankruptcy lawyers cannot help you with such priority debts.

2. The small business can only seek protection from debts that arose before the business filed its bankruptcy petition. Those debts that were obtained after the date of the filing of the bankruptcy petition could not be covered by the bankruptcy protection laws.

3. Clients are advised by business bankruptcy attorneys to list every debt incurred according to their schedule. If a debt is not listed, it cannot be discharged by the bankruptcy process.

4. If it is discovered that the business owner received any asset, including money, by fraud, then the debt will not be discharged by the court.

5. The court can deny the debt discharge in the event that it discovers an act of dishonesty by the business owner. Example of dishonesty could be lying, falsifying records, destroying property or records, destroying assets, disobeying court orders, etc.

6. Business bankruptcy lawyers can only help obtain a Chapter 7 discharge once in 8 years.

7. When the court discharges debts that are secured by an asset, like lien on an office building, it does not necessarily mean that the debt has to be paid in cash. The financial institution that holds the lien can take possession of the property and then sell it.

8. There are instances when the debtor may like to continue paying a debt even after the court has already discharged it. For example, if a business owner has obtained a loan for the purchase of a car and this loan has been discharged by the court, then the business owner can enter into a “Reaffirmation Agreement” with the lender and continue paying his debt (mainly because he needs the asset. The court supervises this type of agreement.

These are a number of details you have to be aware of before contacting or choosing from the finest business bankruptcy attorneys.

Before Seeking Bankruptcy Protection - Consider Different Bankruptcy Options

Before, the topic of bankruptcy was a touchy one. However, as time flies, people became more aware of what bankruptcy means, especially Chapter 11, which pertains to reorganization of the business. When a business finds it difficult to meet its financial obligations, a bankruptcy is almost certainly to follow. The required interest for the loans that the business needs to pay usually eats up the company’s revenues, thereby leaving the company financially distressed.

While there may be various business bankruptcy options available for a company, it is still important for a business to weigh these options first, before deciding on one. There is also a need for a bankruptcy attorney to be appointed by the company, one who is aware of the bankrupt laws that can be applied. In fact, bankruptcy lawyers can present the company with other feasible options, and not just bankruptcy.

The following are the different business bankruptcy options that are available for financially constrained businesses:

1. Chapter 7 - Liquidation. If the business does not see any hope in the future because of an unprofitable product line or lack of assets or impossible debt, then it must file for protection under Chapter 7. Chapter 7 is ideal for sole proprietors and small businesses, where the name of the business is directly connected to the name of the owner or owners. In this type of bankruptcy, business assets are sold and the proceeds from the sale are used to compensate creditors. Once the proceedings are over, the company would not exist anymore.

2. Chapter 11 - Reorganization. This is opted for by companies with potentials but are hounded by debts. This allows a company to reorganize the structure and the manner by which it performs operations, hence giving more time to the company to pay up its debt. The company needs to submit a reorganization plan together with its petition for bankruptcy, which must be approved by its creditors. If creditors approve the reorganization plan, then the company must comply with the terms in the plan. When the creditors are paid and the plan has been executed fully, then the debts of the company are eliminated.

3. Chapter 13 - Wage Earner Plan. It is referred to as wage earner's bankruptcy, and a sole proprietor who has mixed up his personal assets in his business, so he can gradually repay his debts from his wages. This Chapter helps protect the personal assets of sole proprietors.

4. Chapter12 - Family Fishermen Bankruptcy. Farmers and fishermen can seek protection from their creditors under Chapter 12 bankruptcy.

These are the various business bankruptcy alternatives that you can choose from. Businesses have to consider whether it would need liquidation or mere business debt consolidation, take a look at secured debts, tally all their resources, and take time to ponder upon whether or not to appoint a business bankruptcy lawyer to handle bankruptcy filing.

Filing For Chapter 11 Business Bankruptcy - Is It Your Best Choice?

If you own an incorporated business and you need to ask for business bankruptcy protection, two options that you may be taking into consideration are Chapter 11 and Chapter 7 bankruptcy. In Chapter 7 filing, you will have the federal court that presides over your petitioning appoint a trustee who for all intents and purposes becomes the temporary owner of your assets and your business. With this type of business bankruptcy, you would not have a hand in the business operation because it will be the trustee who would be choosing who to hire, who to fire, how to utilize the business assets to pay off creditors, how to structure the business for the benefit of every shareholder, and many more. Depending on your circumstances, filing for a Chapter 7 business bankruptcy may be your most feasible option. Chapter 7 exists for your protection and that of your creditors. However, some businesses facing bankruptcy may find it more attractive to file for Chapter 11 protection.

By filing a Chapter 11 business bankruptcy, you get to maintain control and command over business assets, as well as the business operations. The stipulation from the court is that you must appoint your management team to become a “debtor-in-possession”, or DIP. The DIP acts like an agent, one who works out a deal with your business creditors, with regards to payment terms that are agreeable to both parties. These payment plans may mean periodic partial payments until a debt is paid off to some creditors, while other creditors may agree to take a lesser amount than what is owed to them in exchange for ceasing all legal collection attempts against you. The DIP acts in the capacity of a court appointed trustee, except that it comes from within your own organization and no-one is appointed by the court. The DIP is going to have the business' best interests in mind, whereas a court appointed trustee cares more about paying off creditors.

Whereas Chapter 7 business bankruptcy filing is about liquidation, Chapter 11 filing is “only” about restructuring. With Chapter 11, business operations are restructured to find the best solution that will allow you to pay debts in a timely manner. This may necessitate you to lay off workers, either permanently or temporarily, and may even cause you to excise one entire department. The DIP will be the one who will supervise the whole process and determine what caused the inefficiencies among the company, which eventually resulted to the inability to pay up creditors in a timely manner, and will make sure that those responsible for such inefficiencies are eliminated. The federal court presiding over your Chapter 11 business bankruptcy petition will necessitate you and your creditors to make periodic progress reports regarding the whole process.

When a number of your creditors, or perhaps all of them, are not pleased with the performance of the DIP, they could file a petition in court to have the DIP replaced with its own appointed agent. This is not at all to your business' advantage. Because of this, it is just proper for you to seek the services of an attorney who has the expertise in business bankruptcy law if you are considering filing for Chapter 11. His title will be “Debt Relief Agent”. Your lawyer can give the proper advice to your DIP, and will be able to negotiate with creditors. That way, filing for Chapter 11 business bankruptcy would not result to your business’ destruction.

If you see that business bankruptcy protection is already required by your business, it is best that you seek out the help of an experienced bankruptcy lawyer who could give you the right advice with regards to the filing option that would be appropriate for your business. Likewise, you might also find an alternate solution to filing bankruptcy. Business bankruptcy filing really should be a last resort to salvaging your business.

Filing For Business Bankruptcy Basics

Individuals, creditors and businesses are protected by the bankruptcy law of the United States. Bankruptcy laws for businesses facilitate and enable reorganization of debt to pay off creditors without the business being destroyed or the orderly liquidation of assets to pay off creditors and divide up a failing business for others to buy up parts of and try to make successful. Therefore, the bankruptcy laws protect the business, the owners of businesses, operators and creditors of the business, consumers, and the economy as a whole.

All bankruptcy cases are presided over by federal courts of the United States. There are two types of bankruptcy for business owners, as established by federal law in 1978: Chapter 7 and Chapter 11. There is also what is known as Chapter 13 bankruptcy, but incorporated businesses cannot file under that type. Self-employed individuals, however, may file under Chapter 13.

For businesses, Chapter 7 would entail filing a petition for bankruptcy, then a court-appointed interim trustee would be in control of the business’ non-exempt assets and accounts. This appointed and temporary trustee has broad power over the business during his appointed time. Finding unsecured financing, making managerial changes, and liquidating assets so as to pay off creditors while trying to keep the business from total failure are all within the scope of the trustee's powers. Chapter 7 bankruptcy is the option for liquidation.

For reorganization of a business, Chapter 11 bankruptcy is the option. Under this option, the court oversees a flexible process by which the debtor business and its creditors work out payment arrangements to their mutual benefit and solution. The business' principals maintain control of the business and remain in possession of its assets. The business' management team goes on court record as being "debtor-in-possession", or DIP, and there is no trustee appointed. However, if the creditors see that no viable solution is arrived at by the DIP, and that the assets are still mismanaged, they can petition the court to intervene and to appoint its own agent that will replace the DIP. For the federal court to do this intervention, it must be satisfied with evidence that the creditors are correct in their assessment of continued mismanagement.

The forms filed by the business in federal court, like those that document the business’ assets and liabilities, should be perfectly accurate and filed in the correct manner. The business may lose its bankruptcy protection, and the business could be totally lost, if it fails to accurately and correctly file the forms needed. Therefore, if you own a business either alone or with partners and you deem that you may need to file for bankruptcy, you should consult a bankruptcy lawyer. When the lawyer is working in this capacity with you, he would be put on file by the federal court as a “Debt Relief Agent”.

If you own a business and you and any partners are considering filing for bankruptcy, consult a bankruptcy lawyer who has experience working with business owners.