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, a court-appointed trustee may oversee 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 most 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 to decrease expenses. Although courts require a high standard before the court will accept the proposed restructuring plan, the court’s primary 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 to finalize the plan and consummate its terms.
Who Is Eligible To File For Chapter 11 Bankruptcy?
Unlike other forms of bankruptcy, there is no “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.
What Makes You Ineligible for a Chapter 11 Bankruptcy?
Individuals barred from applying for a Chapter 11 bankruptcy include stock and commodity brokers, as they must file under a Chapter 7. If you are not seeking to reorganize your finances, this also makes you ineligible. However, it is not required that you are insolvent before filing your Chapter 11 case.
What Makes a Chapter 11 Bankruptcy Different From Other Options?
Chapter 11 bankruptcies are unique in that they are designed to help a business or individual reorganize their financial situation. While large companies may use this tool to remain financially stable while they pay back their secured and unsecured creditors, a small business can file a Chapter 11 case if it benefits them. The Chapter 11 bankruptcy will impact your credit like most bankruptcy cases. However, unlike a Chapter 7, not all your debts may be removed, and you can keep most of your assets much like a Chapter 13. Although, Chapter 13 is mainly for individuals who are struggling financially and insolvent. Chapter 11 bankruptcy allows business owners to create a reorganization plan that helps them stay afloat, even if they are not insolvent.
How Does a Chapter 11 Bankruptcy Lawyer Long Island Help You?
A bankruptcy attorney will be able to gather all the facts regarding your Chapter 11 reorganization case and create a repayment plan that works for your company. In addition to creating a new Chapter 11 plan, they help you review what you can expect regarding any real estate or other property you owe to debtors.
When you meet with your attorney, they will provide solid legal advice that helps you understand what is necessary to file a Chapter 11. Business reorganization can be overwhelming and confusing. However, after an initial review of your Chapter 11 case, they can give you an accurate idea of what to anticipate.
Advice on Your Options
If your Chapter 11 case is not a good fit for your company, you can consider filing for another type of chapter. For example, a Chapter 7 or Chapter 13 may be better suited for your financial goals. This may be helpful if there are risks associated with a Chapter 11 that you feel are not beneficial. Your repayment plan should be tailored to your company’s needs, helping improve long-term financial health and success.
Your bankruptcy lawyer can also guide you if you are a debtor in possession. This is when you own real estate, assets, or other property owed to secured creditors. When they begin your Chapter 11 case, you may be required to release some of your property to creditors. This can impact you as a business owner and will be a tough decision to make. A professional bankruptcy law firm understands how this works and can provide useful direction.
They Prevent Massive Errors
A large percentage of individuals who file their own bankruptcy cases wind up discharged for one reason or another. Bankruptcy attorneys vastly improve your chance of being approved. This is because a bankruptcy law firm is experienced in creating new repayment plans that are feasible and can provide long-term financial stability. Their guidance can help you avoid common mistakes when you file for bankruptcy. Bankruptcy attorneys are very competent and can help you avoid case dismissals, missed deadlines, and other errors that can prevent your case from being approved.
Collect Important Information for Paperwork
Your attorney will need to collect all information regarding your finances and how much you owe to secured and unsecured creditors. They can inform you on exactly what is required to fill out to file for your Chapter 11 case. Some of the information you’ll be required to provide according to the bankruptcy code includes the following:
- Current debts owed to creditors and if you are a debtor in possession
- Which debt claims are a priority or must be paid in full
- What percentages of debts will be repaid
- How debts will be paid
- Guidelines on how the repayment plan will proceed
- The future of the debtor
- Why the debtor decided to petition for a Chapter 11 bankruptcy
- Financial information, such as streams of income, bank statements, and assets
All of this information will be included in the disclosure statement that your law firm will present to the bankruptcy court. This list is only a brief overview, as your bankruptcy attorney will go into deeper detail to help you file a petition.
Representation in Court
Your attorney will represent you and go over your disclosure statement before the bankruptcy court. According to the bankruptcy code, you must attend a mandatory hearing called a 341 meeting of creditors. This is where your secured and unsecured creditors will come together to ask questions or provide input on your bankruptcy repayment plan. Your lawyer will prepare you ahead of time so that you understand what will happen in court.
Top Reasons Chapter 11 Reorganization Can Benefit You
Chapter 11 bankruptcy comes with many benefits that can improve your future business processes and long-term finances.
Chapter 11 bankruptcy allows you to begin with a fresh start. This is whether you are a business owner of a small business, large corporation, or an individual. You can work towards discharging debts and creating a plan that helps alleviate some of your financial burdens. Your creditors receive a fair and equitable distribution of funds. Any disputes or debt claims can be resolved and consolidated. Additionally, your finances are improved as a bankruptcy attorney can help create a repayment plan that takes you out of uneconomic and unbeneficial business arrangements. Your creditors benefit, as they receive more than they would expect in a liquidation.
Debtor’s Estate is Protected
Once you and your attorney file a petition, all of your assets are now considered part of the debtor’s estate. Assets, even if in possession of creditors, are part of this estate as it is irrelevant who is in possession of them. The bankruptcy will help to preserve the value of the debtor’s estate.
When your Chapter 11 bankruptcy is filed, you enter into automatic stay. This means that all creditors must cease their collection efforts. They are sent a one-page summary forbidding them from demanding payment for debts.
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!