Chapter 11 Bankruptcy

Tue, Jun 9, 2015

Bankruptcy

ch 11Chapter 11 bankruptcy is primarily for businesses, although SmithLaw has seen it filed by individuals before.

Chapter 11 bankruptcy allows for reorganization of a business. It is filed in the hopes of keeping the business alive long enough to pay off debts and usually to stay in business after the bankruptcy phase is finished. This differs from Chapter 7 bankruptcy, which requires liquidation of assets and for the business to close in an effort to pay off debts.

During Chapter 11 bankruptcy, the business owner is still involved—but as the debtor in possession. The appointed trustee is the one running the business and a bankruptcy plan is put in place to help the business get out of debt or emerge as a new company. This plan varies but can include new loans, liquidation of some assets or parts of a business, or cancelling some contracts the business has already signed—all in an effort to eventually pay back creditors.

Creditors play a more involved role in a Chapter 11 bankruptcy. The bankruptcy courts have the ability to create a creditor’s committee in an effort to make sure all creditors are being looked after and that they are comfortable with the progress of the bankruptcy. A creditor’s committee is not required in all cases, but can be mandated by the court.

Bankruptcies often create a stir, because big names are not immune to bankruptcies. The 2008 filing of Lehman Brothers is one of the largest bankruptcies in United States history. Others of note include Enron, Chrysler, General Motors, and Washington Mutual.

The United States courts website has further information on Chapter 11 bankruptcies at this link.

Attorney Christopher D. Smith, Sr. is designated a Board Certified Consumer Bankruptcy Lawyer by the American Board of Certification.  SmithLaw is located in Lakewood Ranch, Florida.  Attorney Smith concentrates on bankruptcy, civil litigation, probate, estate planning, and elder exploitation cases in the Sarasota and Bradenton area.  Call 941-202-2222 to learn more.  SmithLaw offers free consultations in certain areas, including consumer bankruptcy, probate, and personal injury matters.

Image: Some rights reserved by kevin dooley

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