Rayman & Knight offers representation to businesses who require debt relief in order to remain viable. In some circumstances, this is best accomplished by a Chapter 11 bankruptcy. Chapter 11 protection shields companies from lawsuits while it puts together a plan to manage its financial obligations to other parties.
Chapter 11 begins with the filing of a petition with the U.S. Bankruptcy Court. While creditors may unite to force a defaulting debtor into Chapter 11, most often a business voluntarily files for Chapter 11 protection. While Chapter 11 is available to individuals, it is most often used by corporations, limited liability companies, and partnerships.
A proposed plan for the reorganization of the business’s financial affairs is critical to a Chapter 11 case. During the first four months of the case (or longer with court permission), the debtor has the exclusive right to propose a plan, which creditors will vote on. Even if a majority of creditors do not approve the plan, the court may still confirm it if it is feasible, in good faith, in the best interests of creditors, and fair and equitable according to bankruptcy rules.
The majority of the time, a Chapter 11 debtor becomes what is called a “debtor in possession.” The debtor remains in possession of the business, and continues to operate it as before the bankruptcy filing. A trustee is typically not appointed unless the court finds sufficient cause to do so, such as fraud on the debtor’s part.
While the debtor operates the business, the court assumes control over major decisions of the business. These include sale of assets, entering into a lease for real property or breaking such a lease, and expanding or winding down business operations.
Unlike other chapters of Bankruptcy Code, Chapter 11 does not last for a fixed period of time, and a case may last from a few months to several years. If appropriate, a Chapter 11 case can be converted to a Chapter 7, or may be dismissed.
Rayman & Knight has extensive experience assisting businesses who need debt relief. If you would like to learn more about debt relief for your business under Chapter 11 of the Bankruptcy Code, we invite you to contact us for a consultation.