Philadelphia Chapter 11 Bankruptcy Lawyer
Chapter 11, or the corporate reorganization, is mainly designed to help struggling businesses stave off creditors until market conditions improve and they are able to turn a profit. Chapter 11 is helpful to businesses that are currently profitable, or businesses that can show that they will soon be profitable, but they are currently unable to service their debt burdens. The goal of Chapter 11 is to keep the business afloat, stave off creditors, avoid a liquidation, and to get creditors to agree to the reorganization plan.
Chapter 11 can solve cash-flow problems for businesses and alleviate indebtedness. After the successful completion of a Chapter 11 plan, many companies are able to emerge from bankruptcy on a stronger financial footing than when they first filed for bankruptcy. However, Chapter 11 is not the only bankruptcy relief available to companies and corporations. Companies can also file for Chapter 7 if they wish to liquidate and close shop.
Chapter 11 Bankruptcy Lawyer Philadelphia
A business that has a positive cash flow but is unable to meet its obligations may benefit from a Chapter 11 filing by presenting its creditors with a plan to repay its debts. Filing for Chapter 11 allows a business to jettison bad leases, and propose a plan to manage its debts and become profitable again.
Like any other bankruptcy filing, the Chapter 11 filing stops creditor actions automatically, by court order, the moment that the petition is filed. This is called the automatic stay, and it is often useful to businesses that are currently facing serious creditor actions such as foreclosure or execution on assets. The bankruptcy court sends a notice to all your creditors stating that the company has filed for bankruptcy.
Lawyer for Chapter 11 Bankruptcy Philadelphia Free Consultation
This is when the owner gets to take a deep breath. Now is the time to take a clear-eyed look at the company’s finances and its outlook. During the bankruptcy process, the attorney, accountant, and business owner work together to put the company back on the right path.
Chapter 11, Step by Step
The first step is to open a Debtor in Possession account, which is a special bank account that the bankruptcy court can monitor. This is required of all companies that file for bankruptcy under Chapter 11.
Second, the company must comply with all disclosure requirements, which includes monthly reports on the status of the business’s Debtor in Possession bank account balance, profits, losses, accounts receivable and payable.
Third, it is important to assess what agreements are favorable to the company and what agreements are not. At this point in the process, the company is uniquely positioned to avoid some lease agreements that are not in its financial best interest, and affirm others it wishes to keep.
Finally, a plan of reorganization must be drafted that offers the creditors more than they would receive if the company were liquidated. In order for the Chapter 11 plan of reorganization to be approved by the court, it must be accepted by a majority of the creditors, and it must comply with other provisions of the bankruptcy code. For example, taxes must be repaid in five years at the latest. Once the plan is drafted and filed, creditors get to vote, and if the vote goes through, the court will confirm he plan and allow the company to restructure its debts.
Why You Need a Bankruptcy Lawyer to File for Bankruptcy under Chapter 11
If you are a business owner, you are probably aware that filing for Chapter 11 is not an endeavor you should take on without the help of qualified professionals. First, there is a high reporting burden when you file as a company. An accountant must prepare monthly profit and loss statements, and must be prepared to testify to the court on the company’s finances. Moreover, the exact logistics of which creditor gets to vote and how much their vote counts, and how a plan is confirmed, are technical issues that are best left to an experienced bankruptcy attorney.
Finally, having a familiarity with the personality of bankruptcy judges, clerks, and court staff provides us with a better understanding of where your case is going, and is therefore to your advantage. Bankruptcy is not for all distressed businesses, and the best way to ascertain whether your company can benefit from filing is to talk. Call us to speak to a Bankruptcy Attorney today. Finally, for a better understanding of all the bankruptcy chapters, see the Department of Justice website here:http://www.justice.gov/ust/eo/public_affairs/factsheet/docs/fs01.htm.
This content was written on behalf of Greg Prosmushkin.