Making the decision to file for bankruptcy is not easy one and is often made under stressful circumstances. The daily calls from creditors and collection agencies, the threats and scare tactics and the uncertainty of being unable to pay down your debts and how that effects your financial future are all cause for a great deal of stress. But it is not just individual consumers who face the daunting specter of owing a ton of money that they don’t have to a ton of creditors who do not much care about their circumstances. Many businesses and corporations, as we often hear in the news, have to resort to a bankruptcy filing in order to restructure and attempt to get back on financial track. While most individual debtors file for chapter 7 bankruptcy in order to relieve their burden, businesses often file for chapter 11 bankruptcy. Chapter 11 of the bankruptcy code is designed to help businesses, and in some cases individuals, reorganize and restructure without having to liquidate all assets. Let’s take a closer look
Chapter 11 Bankruptcy: Help for Struggling Businesses
Any business organized as a sole proprietorship, partnership, LLC or corporation is allowed to file for chapter 11 bankruptcy, as long as they meet the requirements. The requirements are complex and can be confusing, so it is recommended that you consult a bankruptcy attorney before proceeding.
Sole proprietorships are often better served by filing under chapter 7. However, for partnerships, LLCs or corporations, chapter 11 is the only means by which the business can be reorganized and continue to operate.
What is Different about a Chapter 11 Bankruptcy?
In chapter 7 bankruptcy, the debtor business is required to liquidate and sell all of its assets. The money from the sale is then used to pay back the creditors.
A chapter 11 bankruptcy is a little different and offers a way for business to stay in business while paying back their debts. The principle idea around a chapter 11 filing is the assumption that the future, long term revenues of a business are more valuable than the current assets held by that business. Of course, to stay in business the business cannot be required to liquidate completely. If the business doesn’t have anything with which to operate, it cannot pay down its debts in the long term. In chapter 11, the business filing bankruptcy is a given a chance to get its financial house in order while continuing business and paying down its debt.
While the business undergoing chapter 11 bankruptcy is allowed to continue operations, it is limited to the sale and purchases normal to its standard business operations. Remember, the primary goal of bankruptcy, whether for an individual or a business, is to get control of debt and pay it off. Therefore, the business is not permitted to acquire any other companies or expand its operations in any way. It may also be required to lay off employees and renegotiate contracts in order to free up money for the debt repayment plan.
The above does not exhaust all the ins and outs of filing for chapter 11 bankruptcy. If it did, there wouldn’t be a need for a bankruptcy proceeding to begin with. Since a bankruptcy under chapter 11 is so complex, even more so than chapter 7, you will have to retain the services of a quality bankruptcy attorney before going through with the process. It is very difficult – nearly impossible -for a business to go it alone into chapter 11. Companies that secure a quality bankruptcy attorney are also more likely to bounce back from their hard times! Check out the article in the hyperlink about companies that have bounced back from a bankruptcy.
Chapter 11 Bankruptcy with Kalicki Collier Reno
The law offices of Kalicki Collier are proud to offer quality legal services to business and individuals in the Reno area. The Kalicki Collier bankruptcy attorneys in Reno want to help you get your business back to solvency and success. The Kalicki Collier team will guide you through the process and make sure that everything that can be done is being done. We have years of experience in bankruptcy proceedings and offer our clients a commitment to your financial future. Contact us today to get back on the path to financial success.