Consulting and retaining a bankruptcy attorney will provide advice and direction that can help reorganize a business in financial distress. A bankruptcy attorney will help you decide which type of bankruptcy filing is best for your business. Businesses in financial despair will either liquidate and dissolve or partially liquidate and restructure. Ideally, the preference would be to keep the doors open and rejuvenate the business. In either case, it would be most appropriate to file a Chapter 11 bankruptcy petition. Chapter 11, unlike Chapter 7, is an option for debtors who have the means to restructure their obligations to continue in business.
Though a Chapter 11 filing can be costly, quite a complicated process, and very time consuming, if a partnership, LLC, or corporation plans to restructure and continue in operation, then this is the only option in terms of filing for bankruptcy. It is also the only option for sole proprietorships who do not meet the standards and qualifications to file under Chapter 13 (which limits the amount of discharged debt to $360,475).
Under Chapter 11 of the Bankruptcy Code (sometimes referred to as the “restructure” chapter) typically, debtors restructure their finances by developing a reorganization plan that must be approved by the bankruptcy court. A good plan will reduce debt obligations by modifying payment terms, balance income and expenses, reaching profitability in order to continue operating. Often times, the debtor will downsize and sell assets in order to repay debt owed.
In the case of a small business owner, your debt must be more than $2,490,925 and you will usually be afforded the luxury of escaping the “creditor’s committee” requirement (which represents the interest of unsecured creditors). However, the small business will likely be subject to additional reporting (unlike other Chapter 11 filers, such as LLC’s or corporations). Such reporting will include recent tax returns, most recent balance sheets, statement of operations, cash flow statements, etc.
Ultimately, with the right restructure plan, your business can thrive and eventually begin to make huge profits. The only way to ensure a successful Chapter 11 bankruptcy filing is to enlist the assistance of capable attorneys to assist with the preparation of the appropriate forms, negotiating with creditors, and help develop a new business structure that will likely be approved by the bankruptcy court. The DCDM Law Group is highly experienced in Chapter 11 bankruptcy filings and can help your business gain a fresh start with remarkable strategy and an impressive restructure plan. Contact us today.