Florida Chapter 11 Bankruptcy: How to Avoid Filing for Chapter 11 Bankruptcy in Florida

Florida Chapter 11 Bankruptcy: If you are a small Florida business that wants an alternative to filing for Chapter 11 bankruptcy - please visit our website at: http://www.Business-Bankruptcy.com or call us toll-free at 866.876.5938.

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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.

Contemplating Chapter 11 Business Bankruptcy - Understanding When Is The Perfect Moment

Chapter 11 business bankruptcy is also referred to as business reorganization. It consists of filing a reorganization plan (along with specified financial documents) with a bankruptcy court. The court calls for a meeting of all the creditors who need to vote on and accept the reorganization plan by a 3/4th majority. The reorganization plan is carried out by the business, and once the bankruptcy ends, the business becomes free from debt.

Chapter 11 Business Bankruptcy Warning Signs:

- When the money that you have withheld for taxes is already being used. That money needs to be paid to government, however, if you already use it for business, it signifies that you are cash-strapped.

- Whenever you keep stretching payments to vendors for a long period of time, not able to pay vendors punctually, or when you are already anxious for credit and keep on switching vendors.

- When serious instances that could affect the business happen such as a natural disaster, death of a partner, or embezzlement, and the like.

- Inability to repay secured debt installments on time or unable to repay them anymore.

- When your business has one or two customers and they declared business bankruptcy.

Business owners tend to wait for better times and expect their creditors to listen to them, which is in fact one of the biggest mistakes they could make. Creditors want repayment of debts and will do anything to get their money back. As soon as the warning signs show up, a business owner should appoint a Chapter 11 business bankruptcy lawyer.

A business can be assisted in exploring other possible options aside from bankruptcy by hiring a lawyer. For example, the lawyer would take a look and analyze the situation, then make suggestions such as a debt-for-equity swap or a debt restructuring exercise. If an attorney is not hired by the business owner, then he is surely digging a much deeper hole to bury himself in.

There is no simple business bankruptcy. Child support, taxes, alimony, etc, which are classified as priority debts would have to be paid, and if the business owner's personal property has to be sold just to repay these, then it has to be done. When it comes to priority debts, the law does not take pity. So if priority debts are the cause why a business is struggling, then a Chapter 11 business bankruptcy is not the option but a Chapter 7 bankruptcy.

Once priority debts are met, secured creditors come next, followed by semi-secured creditors and eventually unsecured creditors. In a Chapter 11 business bankruptcy, majority of these creditors ought to agree with the reorganization plan. Once the plan is agreed upon, the business owner must carry it out to perfection. If he does not, the Chapter 11 process fails and creditors can take their own legal steps to get back their money.

Smaller sized business owners seldom consider bankruptcy except when there are serious pressures. If your company has fallen behind with creditors and you are thinking about business bankruptcy, there are other solutions like business debt consolidation or debt management. Look at all options before filing for different types of business bankruptcy.

Business Bankruptcy - Frequently Asked Questions

Do you happen to be a small business owner being strangled by mounting debts and limited cash flow? Are you no longer able to repay debts, including priority, secured and other types of debts? Have you come to a point that you are using the money from withheld taxes for business? If so, here are some business bankruptcy FAQ's that can help you understand what’s involved:

1. What are the different types of business bankruptcies?

Sole proprietorships, partnerships, LLCs and corporations can file for Chapter 7 or Chapter 11 bankruptcy. Chapter 7 is liquidation and it involves selling the business’s non-exempt assets and repaying creditors with the proceeds. The business ceases to exist after the bankruptcy process is complete. Chapter 11 is business reorganization. It gives a business more time to repay its debts. Businesses that see no point in continuing operations may seek protection under Chapter 7, while viable businesses can opt for Chapter 11 business bankruptcy.

2. What are the challenges of a business bankruptcy filing?

Sole proprietors have to file for bankruptcy in their individual name because the sole proprietorship business is an extension of the business owner. Partners run the risk of being sued by the case trustee in a Chapter 7 business bankruptcy in case the assets of the partnership firm are insufficient to repay its debts.

3. Chapter 7 or Chapter 11 business bankruptcy - which option should a business choose?

The business owner must understand that by reorganizing his business by seeking protection under Chapter 11, he cannot expect better market conditions. He must opt for this type of bankruptcy filing only when he is operating a business that can generate profits in the future given its current strengths. Chapter 11 business bankruptcy will help him free up some cash that can be used to run the day-to-day business operations. It will also help him reject expensive leases and prevent creditors from taking over his business assets.

4. What happens when a Chapter 11 bankruptcy process fails?

The court will convert it to a Chapter 22 bankruptcy, which is similar to a Chapter 7 bankruptcy. The business assets are sold and the business ceases to exist after the Chapter 22 bankruptcy process is complete.

5. What should the business owners pay attention to?

Before opting for Chapter 11 bankruptcy, the business owner must calculate his priority debts. If he cannot repay these debts, Chapter 11 business bankruptcy cannot help him. He must also check the extent of his secured debt. No secured creditor will reduce his debt because he can always take possession of the asset much to the dismay of the business owner. The business owner must make a list of his creditors and understand their classification and priority before choosing a business bankruptcy category.

These are some of the critical factors that all business owners must pay attention to before seeking protection under Chapter 7 or Chapter 11 business bankruptcy.

Assignment -- An Alternative To Business Bankruptcy

An Assignment for benefit of Creditors can be considered by business owners who don’t want to seek protection under a Chapter 11 business bankruptcy. This option should only be taken into consideration when the business is no longer sustainable due to an unprofitable product line and/or a mountain of debt. Chapter 7 and Chapter 11 business bankruptcy differ from an assignment for benefit of creditors. In fact, it is a substitute for Chapter 7 bankruptcy and business owners who need reorganization, not closure, must not consider it. Businesses that need restructuring must opt for Chapter 11 bankruptcy instead.

State laws govern an Assignment for Benefit of Creditors, therefore, it could vary from one state to another. It is supervised by state courts. In an Assignment, an assignee is empowered by the state court to take control of the assets of the business. The assignee is usually chosen by the business owners and the creditors and it is crucial that the assignee is reputed and experienced. You need to take note that in the case of a business bankruptcy, it is the court that chooses the case trustee. The business assets must be assigned by the business owner to an assignment estate.

A fiduciary role is played by the assignee towards the creditors, and he makes it a point to be able to sell the assets of the business at the maximum price. After he sells the assets, he pays the creditors, deducts fees and costs, and returns the balance to the business owner.

All other processes in an Assignment move like they do in a Chapter 7 business bankruptcy. A list of all creditors are filed by the business owner. Creditors are then notified by the assignee of the Assignment, and would set a date wherein creditors must be able to lodge their claim. The business becomes hollow the moment that the assets are transferred to the assignment estate. Even if a case is filed against the business, the creditor wouldn’t get anything.

A business owner must choose Assignment over business bankruptcy when the market price of all the business assets is inadequate to cover the debts. Assignment is less formal than a business bankruptcy process and moves much faster. Creditors cannot object to any sale made by the assignee. However, until the other party gives consent, an assignee could not force transfer contracts and leases. In a chapter 7 or Chapter 11 business bankruptcy, no such consent is required. Therefore, business owners with franchisees must not consider an Assignment, but a bankruptcy.

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.