Generally, a Chapter 11 bankruptcy is a form of bankruptcy that specific ally focuses upon reorganization. Although it is similar to chapter 13 bankruptcy, the primary difference is that there is an absence of limitations in regard to how much money can be owed by the debtor. Originally intended only for large corporations, it is now possible for individuals to file this form of bankruptcy as well. It does not matter if the business is a sole proprietorship or a corporation, as it can be used by either for reorganization purposes.
Why Companies And Individuals File Chapter 11 Bankruptcy
The primary reason that Chapter 11 is filed is because a business or individual is unable to pay its creditors the debts that are owed. Both the business, as well as the creditors, can file with a federal bankruptcy court in order to obtain protection using this type of bankruptcy. Typically, the control of the business remains in the control of the company that files, being regarded as a debtor in possession. Despite having control over their business during the bankruptcy, it is still subject to the jurisdiction and oversight of the court.
How Debtors Are Protected After Filing Chapter 11
There are several mechanisms by which a debtor may restructure his business during this bankruptcy process. They may acquire loans and financing, with favorable terms, which gives new lenders first priority over any of the business’s earnings. It is also possible for the Court to deem it permissible for the debtor in possession to cancel and reject contracts. They may also be protected from additional forms of litigation against their business through what is called the imposition of an automatic stay.
Filing for Bankruptcy Chapter 11 is an option that businesses may choose if they wish to reorganize their assets in order to pay debts owed to their creditors. In most cases, it is beneficial to work with a bankruptcy attorney that can properly complete and fill the paperwork that is necessary. By doing so, the business will improve its odds of being able to pay off its debts before the end of five years, helping it to become financially viable once again.
CALL TODAY FOR A
FREE INITIAL CONSULTATION !
San Antonio Chapter11 Bankruptcy Attorney