Chapter 11 Bankruptcy Lawyer in Long Island
Chapter 11 bankruptcy, also frequently referred to as reorganization bankruptcy, permits debt restructuring under the United States bankruptcy laws. Chapter 11 bankruptcy is a means of restructuring an entity’s affairs, debts, and assets, and it is available to every business and, in some instances, individuals. Because Chapter 11 bankruptcy cases are geared towards businesses, chapter 11 cases are the most complicated types of bankruptcy cases and often incur substantial legal fees during a course of representation.
If Chapter 11 bankruptcy cases are expensive and complicated, why do people file for Chapter 11? The goal of Chapter 11 bankruptcy is to develop a financial restructuring plan that the debtor, creditors, and the court agree on will allow the debtor to pay a portion of its old debt without being overly burdened by such debt as it moves forward. Chapter 11 bankruptcy provides debtors with a means of keeping their businesses afloat and offering them a clean slate after the restructuring period. Under Subchapter V, geared towards small businesses and individuals, there may be a court-appointed trustee who oversees the process. The Subchapter V trustee ensures that the restructuring plan is feasible and in the best interests of creditors while also satisfying the bankruptcy code’s requirement.
What Is The Typical Process Of A Chapter 11 Bankruptcy Case?
During a Chapter 11 bankruptcy case, the court will assist in a business’ restructuring of its debts and obligations. In the majority of Chapter 11 cases, the business remains open and continues to operate throughout the proceeding. Generally, businesses are allowed to perform as per usual. However, in cases that involve gross incompetence, fraud, or dishonesty, a court-appointed trustee runs the company for the entirety of the Chapter 11 bankruptcy case. Moreover, the business is not permitted to make certain decisions without prior consent from the court. These decisions include:
- The sale of assets, excluding inventory
- Beginning or terminating a rental agreement
- Expanding or ceasing business operations
In addition, the court has control over decisions relating to retaining and paying lawyers and entering contracts with vendors and unions. The business is also unable to arrange a loan that will begin following the completion of the bankruptcy.
When submitting a Chapter 11 petition with the bankruptcy court, two options are available: voluntary and involuntary petitions. Voluntary petitions are filed by the debtor and typically include general information regarding the debtor, including a schedule of all assets, debts, transfers, and information regarding the Debtor’s financial affairs for the past several years. Conversely, involuntary petitions are filed by the creditors and are less frequently filed.
Once chapter 11 is filed, the debtor will automatically assume the identity of the “debtor in possession,” and the automatic stay will prevent creditors from pursuing the debtor while the debtor tries to propose a chapter 11 plan of reorganization. Often, the automatic stay also allows the debtor to reach consensual agreements with creditors who were otherwise unwilling to negotiate.
In Chapter 11 bankruptcy cases, the individual or business who filed has the first opportunity to propose a reorganization plan. Restructuring plans vary from case to case and depend on the debtor’s assets, liabilities, and projected income for the plan period. For example, some plans involve liquidating assets to repay creditors, while others may focus on downsizing business operations in an effort to decrease expenses. Although courts require a high standard before the court will accept the proposed restructuring plan, the court’s main focus is whether the plan is feasible and fair. All creditors holding claims are permitted to vote on whether to accept the Debtor’s plan. If creditors approve of the restructuring plan, the court will allow the Debtor the finalize the plan and start consummating its terms.
Who Is Eligible To File For Chapter 11 Bankruptcy?
Unlike other forms of bankruptcy, there is not a “means test” or average income requirements that must first be met. However, debtors are barred from filing for Chapter 11 bankruptcy if the debtor had a prior bankruptcy dismissed within the preceding 180 days for the following reasons:
- The debtor willfully failed to appear in court.
- The debtor failed to comply with court orders.
- Creditors sought relief from the bankruptcy court to recover property upon which they possess liens.
Although Chapter 11 bankruptcy may not seemingly have stringent eligibility rules and regulations, it may not be the best option for some businesses. As previously mentioned, Chapter 11 proceedings can be expensive, are time-consuming, and involve risk. It is best to consult an experienced bankruptcy attorney. Macco Law Group, LLP is here to help you identify your business’s goals and needs. Together, we can discuss your business’s current financial situation, address these issues, and devise a game plan.
Contact Macco Law Group, LLP
Bankruptcy can be a confusing, daunting, and stressful process. Consult with our experienced team at Long Island – Macco Law Group, LLP. We are here to help you answer your questions and regain your financial future. Contact us for your free consultation today!
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